7. Starling Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is: Differential Analysis Continue with Old Equipment (Alternative 1) or Replace Old Equipment (Alternative 2) Date Continue with Old Replace Old Equipment Differential Equipment (Alternative 2) Effects (Alternative 1) (Alternative 2) Revenues: 11000 Proceeds from sale of old machine Costs: Purchase price of new equipment Variable manufacturing costs (5 years) Profit (Loss)