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Managers often face the decision to replace an old machine with a new one. To evaluate this, it's essential to focus on differential costs, which are the costs that vary between options, while disregarding irrelevant costs. In the case of the old machine, it was purchased for $90,000, with a book value of $57,000 after $33,000 in accumulated depreciation. Currently, the machine can be sold for $14,000, but if kept for another five years, its resale value would drop to $2,000. The machine is being depreciated at $11,000 per year, indicating it has been in use for three years. This assessment helps managers make informed decisions regarding asset replacement.