Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $52,000. Variable manufacturing costs are $36,000 per year for this machine. Information on two alternative replacement machines follows.

............................Alternative A.......................................Alternative B

Cost.......................$115,000..............................................$125,000

VMC per year...........19,000................................................ 15,000

1) Should Xinhong keep or replace its manufacturing machine?

2)If the machine should be replaced, which alternative new machine should Xinhong purchase?