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Rory Company has an old machine with a book value of $ 7 9 , 0 0 0 and a remaining five - year useful

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 $76,000. The old machine has variable manufacturing costs of $35,000 per year. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year useful life.
(a) Prepare a keep or replace analysis of income effects for the machines.
(b) Should the old machine be replaced?
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Prepare a keep or replace analysis of income effects for the machines.
\table[[Keep or Replace Analysis,Keep,Replace,\table[[Income Increase],[(Decrease) if replaced]]],[Revenues,A],[Sale of existing machine,$,0,76,000],[Costs],[Purchase of new machine,$,0,(105,000)
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