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. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase?

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

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

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

Answer the question in the following format:

Problem 7:
Exercise 25-11 (Page 1067)
Xinhong Company- Keep or Replace
			Old Machine		Sell for:
	End of Year
			Old Machine: If Kept
			Depreciation	VC Costs	Net-Keep
			New Machines----------
Useful life		years	New Machine A
	End of Year		Cash In	Cash Out	Net-New A
				VC costs
Useful life		years	New Machine B
	End of Year		Cash In	Cash Out	Net-New A
			Depreciation	VC costs