A machine with a book value of $126,000 has an estimated six-year life. A proposal is offered to sell the old machine for $84,000 and replace it with a new machine at a cost of $145,000. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $55,000 to $43,000. Prepare a differential analysis dated February 18 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2) and explain your decision. Answer Spaces for Differential Analysis Schedule: Differential Analysis Continue with Old Machine (Alt.1) or Replace Old Machine (Alt.2) February 18 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues: Costs: Income (Loss):

Analyze each alternative of the analysis: (please provide a written response here with your analysis of what happens under each alternative)

Determine your choice and explain why: (please provide your written response here with your choice and explanation of whether you should continue with old machine or Replace Old Machine)