Rocko Inc. is considering replacing one of its manufacturing machines. The machine has a book value of $50,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $38,000. Variable manufacturing costs are $60,000 per year for this machine.

A new machine is available at a cost of $85,000. Its variable manufacturing costs are $46,000 per year. Should Rocko keep or replace its manufacturing machine?

Which factor is not relevant to the keep or replace decision?

A. Book value of old machine, $50,000

B. Current market value of old machine, $38,000

C. Cost of new machine, $85,000

What will be the reduction in variable manufacturing costs over 5 years, if Rocko replaces the machine?

What will be the total change in Rocko's net income, if it replaces the old and buys the new machine?

Specify whether Rocko Inc. should keep or replace the machine.