A commercial oven with a book value of $134,000 has an estimated remaining 5 year life. A proposal is offered to sell the oven for $17,000 and replace it with a new oven costing $220,000. The new machine has a 5-year life with no residual value. The new machine would reduce annual maintenance costs by $46,000.

REQUIRED: (SHOW YOUR WORK)

Provide a differential analysis on the proposal to replace the commercial oven.