Pharoah Company has a factory machine with a book value of $$169,000$ and a remaining useful life of $6$ years. A new machine is

available at a cost of $$246,500.$ This machine will have a $6-$year useful life with no salvage value. The new machine will lower annual

variable manufacturing costs from $$595,000$ to $$495,000.$

Prepare an analysis that shows whether Pharoah should retain or replace the old machine. $($If an amount reduces the net income then

enter with a negative sign preceding the number or parenthesis, eg$.-15,000,(15,000)$:$)$

Keep

Equipment

Net Income

Increase

$($Decrease$)$

Replace

Equipment

Variable costs

$600,000$

S

New machine cost

$246\mathrm{.}500$

$353,500$

The old factory machine should be

replaced