Grieco Company has been using the same equipment to make its clothing for the last five years. A consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $240,000. The old machines presently have a book value of $124,000 and a market value of $16,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $140,000 and have operating expenses of $19,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $34,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $14,000 a year. Select the true statement.
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