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Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus
Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an 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 of the overtime processing. Current Machine New Machine Original purchase cost Accumulated Depreciation Estimated annual operating cost Remaining useful life $15,000 $7,000 $25,000 4 years $25,000 $20,000 4 years If the current machine is sold, Afrah would receive $6,000. 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. Based on the incremental analysis, what should the company decide? A. B. C. Retain the old machine; Net income decreases by $1,000 Replace the old machine; Net income increases by $1,000 Replace the old machine; Net income increases by $14,000 Replace the old machine; Net income decreases by $14,000
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