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 $$105,000.$ Rory can sell its old

machine now for $$84,000.$ The old machine has variable manufacturing costs of $$35,000$ per year.

The new machine will reduce variable manufacturing costs by $$14,000$ 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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Required A

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