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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
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.
If sold now, the current printer would have a salvage value of $3,200. 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 4 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).)
Current Printer | New Model | ||||||
---|---|---|---|---|---|---|---|
Original purchase cost | $30,000 | $23,200 | |||||
Accumulated depreciation | 16,100 | ||||||
Estimated operating costs (annual) | 3,000 | 2,100 | |||||
Useful life | 4 years | 4 years |
If sold now, the current printer would have a salvage value of $3,200. 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 4 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).)
Keep Printer | Replace Printer | Net Income Increase (Decrease) | |||||
---|---|---|---|---|---|---|---|
Period of 4 years | |||||||
Variable costs | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | ||||
Salvage value | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
New machine cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
$enter a total amount | $enter a total amount | $enter a total amount |
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