Replace Equipment A machine with a book value of $80,000 has an estimated five-year life. A proposal is offered to sell the old machine for $50,500 and replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $11,200 to $7,400 a. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2 a aount aro, enter or: use a minus sign to indicate subtracted ar negatve numbers or a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues: Proceeds from sale of old machine 3,9001 x 0 Costs: Purchase price 0 Direct labor (5 years) 7,000 X Income (Loss) Feedback Check My Work For the continue and replace alternatives subtract the costs from the revenues. Multiply the direct labor for the six year life. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. Learning Objective 1. b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)? Continue with the old machine