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The law firm of Carla Vista and Pharoah relies heavily on a colour laser printer to process its paperwork. Recently the printer has not
The law firm of Carla Vista and Pharoah relies heavily on a colour laser printer to process its paperwork. Recently the printer has not functioned well and print jobs were not being processed. A major overhaul costing $12,800 would make the current printer work properly for the balance of its useful life. Management is considering updating the printer with a faster model. Current Printer New Model Original purchase cost $31,100 $25,900 Accumulated depreciation 19,600 Estimated operating costs (annual) 3,000 2,100 Useful life 5 years 5 years If sold now, the current printer would have a salvage value of $3,800. If operated for the remainder of its useful life, the current printer would have zero salvage value. The new printer is expected to have zero salvage value after 5 years. Prepare an analysis to show whether the company should retain or replace the printer. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Period of 5 years Variable costs $ Major overhaul Salvage value New machine cost Keep Printer $ Replace Printer $ $ $ $ Net Income Increase (Decrease)
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