Rory Company has an old machine with a book value of $$85,000$ and a remaining five$-$year useful life. Rory is considering purchasing a new machine at a price of $$114,000.$ Rory can sell its old machine now for $$81,000.$ The old machine has variable manufacturing costs of $$42,000$ per year. The new machine will reduce variable manufacturing costs by $$16,800$ 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?

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.

$\backslash$table$[[$Keep or Replace Analysis,Keep,Replace,$\backslash$table$[[$Income Increase$],[($Decrease$)$ if replaced$]]],[$Revenues$,],[$Sale of existing machine,$$,81,000,],[$Costs$,],[$Purchase of new machine,$$,114,000,],[$Variable manufacturing costs$],[$Income $($loss$),,,]]$