Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:
Original cost | $56,000 | $95,000 |
Annual operating cost | $22,500 | $15,000 |
Accumulated depreciation | $33,000 | - |
Current salvage value of the existing van | $27,500 | - |
Remaining life | 10 years | 10 years |
Salvage value in 10 years | $ 0 | $ 0 |
Annual depreciation | $2,300 | $9,500 |
If Hartley's Meat Pies replaces the existing delivery van with the new one, over the next 10 years operating income will ________.
◦ decrease by $95,000
◦ increase by $75,000
◦ decrease by $75,000
◦ increase by $95,000