Rory Company has an old machine with a book value of $ and a remaining fiveyear useful life. Rory is considering purchasing a new machine at a price of $ Rory can sell its old machine now for $ The old machine has variable manufacturing costs of $ per year. The new machine will reduce variable manufacturing costs by $ per year over its fiveyear 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.
Prepare a keep or replace analysis of income effects for the machines.
tableKeep or Replace Analysis,Keep,Replace,tableIncome IncreaseDecrease if replacedRevenuesSale of existing machine,,,CostsPurchase of new machine,,,Variable manufacturing costs,,,Income loss
