Answer:
Increase by $75,000
Explanation:
Existing van New van
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 increase by 75000 dollars as follows:
New van ($15,000 × 10 years) - Existing van ($22,500 × 10 years) = $75,000
