B/ Susan, a Pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens M

b/
Susan, a Pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens Manufacturing announced the availability of a new turbo oven that cooks more quickly with lower operating expenses. Susan is considering the purchase of this faster, lower-operating cost turbo oven to replace the existing one they recently purchased. Selected information about the two ovens is given below:
Existing New Turbo Oven
Original cost $60,000 $50,000
Accumulated depreciation $ 5,000 —
Current salvage value $40,000 —
Remaining life 5 years 5 years
Annual operating expenses $10,000 $ 7,500
Disposal value in 5 years $ 0 $ 0
Required: (7 marks)
i. What costs are sunk?
ii. What costs are relevant?
iii. What are the net cash flows over the next 5 years assuming the Pizzeria purchases the new convection oven?
iv. What other items should Susan, as manager of the Pizzeria, consider when making this decision?