Murl Plastics Inc. purchased a new machine one year ago at a cost of $42,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below: Purchase cost new Estimated useful life new Annual operating costs Annual straight-line depreciation Remaining book value Salvage value now Salvage value in five years Present Machine $42,000 6 years $29,400 7,000 35,000 7,000 0 Proposed New Machine $63,000 5 years $ 9,800 12,600 In trying to decide whether to purchase the new machine, the president has prepared the following analysis: Book value of the old machine Less: Salvage value $35,000 7,000 Net loss from disposal $28,000 Even though the new machine looks good," said the president, "we can't get rid of that old machine if it means taking a huge loss on it. We'll have to use the old machine for at least a few more years." Sales are expected to be $147,000 per year, and selling and administrative expenses are expected to be $88,200 per year, regardless of which machine is used. Required: 1. Prepare a summary income statement covering the next five years, assuming the following: a. The new machine is not purchased. b. The new machine is purchased. (Leave no cells blank - be certain to enter "0" wherever required.) 5 Years Summary Keep Old Machine Buy New Machine Difference Total expenses 2. Compute the net advantage of purchasing the new product using relevant costs. of purchasing the new machine