Kate$$s Candy Corporation makes chewy chocolate candies at a plant in Winston$-$Salem, North Carolina. Steve Bishop, the production manager at this facility, installed a packaging machine last year at a cost of $$550,000.$ This machine is expected to last for $10$ more years with no residual value. Operating costs for the projected levels of production, before depreciation, are $$110,000$ annually.

Steve has just learned of a new packaging machine that would work much more efficiently in the production line. This machine would cost $$638,000$ installed, but the annual operating costs would be only $$44,000$ before depreciation. This machine would be depreciated over $10$ years with no residual value. He could sell the current packaging machine this year for $$275,000.$

Steve has worked for Kate$$s Candy for $7$ years. He plans to remain with the firm for about $2$ more years, when he expects to become a vice president of operations at his father$-$in$-$law$$s company. Kate$$s Candy pays Steve a fixed salary with an annual bonus of $5\%$ of net income for the year.

Assume that Kate$$s Candy uses straight$-$line depreciation and has a $10\%$ required rate of return. Ignore income tax effects.