Question
Corporation A currently records $4,000 of depreciation each year on the computer that it uses for its major data processing needs. The computer currently has
Corporation A currently records $4,000 of depreciation each year on the computer that it uses for its major data processing needs. The computer currently has one more year of its useful life and it will have no salvage value at the end of the year. One of the accounts at Corporation A, suggested that the computer be sold immediately for $3,000 and that the company hire a data processing firm to handle their data processing needs. The computer currently requires $25,000 in annual operating costs in addition to depreciation. The data processing firm would charge $10,000 per year for its services. if Corporation A decides to implement this change, what effect will this have on the corporations net cash flow for the last year of the computers useful life? Please explain how you got your answer.
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