Blossom enterprises uses a computer to handle its sales invoices. Lately business has been so good that it takes a extra 3 hours per night, plus every third saturday to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all the overtime processing.

Current machine New machine

original purchase cost $15200 $25400

accumilated depreciation $5,000 -

estimated annual operating costs $24,500 $19,500

remaining useful life 5 years 5 years

If sold now, the current machine would have a salvage value of $11,100. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years. Prepare an incremental analysis to determine whether the current machine should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Retain Replace Increase Machine Machine (Decrease) Operating costs $ $ $ New machine cost Salvage value (old) Total $ $ The current machine should be