Rory Company has an old machine with a book value of $$79,000$ and a remaining five$-$year useful life. Rory is

considering purchasing a new machine at a price of $$108,000.$ Rory can sell its old machine now for $$81,000.$ The old

machine has variable manufacturing costs of $$36,000$ per year. The new machine will reduce variable manufacturing

costs by $$14,400$ 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?

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Prepare a keep or replace analysis of income effects for the machines.