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Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new
Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $103,000. Rory can sell its old machine now for $65,000. The old machine has variable manufacturing costs of $33,000 per year. The new machine will reduce variable manufacturing costs by $13,200 per year over its five-year useful life. (a) Prepare a keep or replace analysis of income effects for the machines. (b) Should the old machine be replaced? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a keep or replace analysis of income effects for the machines. Replace Income Increase (Decrease) if replaced Keep or Replace Analysis Revenues Sale of existing machine 65,000 Costs Purchase of new machine 165,000 Variable manufacturing costs $ 165,000 103,000 99,000 Income (loss) $ (165,000) $ (34,000) $ 131,000 Required A Required B >
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