Wildhorse Company is considering the purchase of a new machine. The invoice price of the machine is $134,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000. The salvage value of the new equipment is expected to be zero after a useful life of 5 years. The company could retain the existing equipment and use it for an additional 5 years if it doesn't purchase the new machine. At that time, the equipment's salvage value would be zero. If Wildhorse purchases the new machine now, it would have to scrap the existing machine. Wildhorse's accountant, Nancy Jackson, has accumulated the following data for annual sales and expenses, with and without the new machine: Should the new machine be purchased?

1. Without the new machine, Wildhorse can sell 12,000 units of product annually at a per-unit selling price of $100. If it purchases the new machine, the number of units produced and sold would increase by 10%, and the selling price would remain the same. 2. The new machine is faster than the old machine, and it is more efficient in its use of materials. With the old machine, the gross profit rate is 25% of sales, whereas the rate will be 30% of sales with the new machine. 3. Annual selling expenses are $173,000 with the current machine. Because the new machine would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased. \begin{tabular}{|c|c|c|c|c|} \hline & & & \multicolumn{2}{|c|}{ Keep Old Machine } \\ \hline Sales & & & $ & 1,200,000 \\ \hline \multicolumn{5}{|l|}{ Less costs: } \\ \hline Cost of goods sold & $ & & & \\ \hline Selling & & 173000 & & \\ \hline Administrative & & 96000 & & \\ \hline Operating income & & & $ & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline & & & \multicolumn{2}{|c|}{ Buy New Machine } \\ \hline \multicolumn{2}{|l|}{ Sales } & & $ & 1320000 \\ \hline \multicolumn{5}{|l|}{ Less costs: } \\ \hline \multicolumn{5}{|c|}{ Cost of goods sold $} \\ \hline \multicolumn{2}{|l|}{ Selling } & 190300 & & \\ \hline \multicolumn{2}{|l|}{ Administrative } & 108000 & & \\ \hline \multicolumn{3}{|l|}{ Operating income } & $ & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|} \hline & & \begin{tabular}{l} Retain Old \\ Machine \end{tabular} & & \begin{tabular}{l} Replace Old \\ Machine \end{tabular} & & \begin{tabular}{c} Net Income \\ Increase (Decrease) \end{tabular} \\ \hline Operating income & $ & & $ & & $ & \\ \hline \multicolumn{7}{|c|}{ Cost of the new machine } \\ \hline Totals & $ & & $ & & $ & \\ \hline \end{tabular}