The law firm of Matadin and Howe relies heavily on a colour laser printer to process the paperwork. Recently the printer has not functioned well and print jobs were not being processed. Management is considering updating the printer with a faster model.

Prepare incremental analysis for decision to retain or replace equipment.Current Printer New Model

Original purchase cost Accumulated depreciation Estimated operating costs (annual) Useful life

$30,000 17,000 3,000 4 years

$24,000 2,000 4 years

If sold now, the current printer would have a salvage value of $4,000. 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 four years.