This is the question with the answer sheet

QUESTION 3 - RETAIN OR REPLACE On January 2, 2013, Benson Hospital purchased a $100,000 special radiology scanner from Picard Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating costs with this scanner are $105,000. Approximately one year later, the hospital is approached by Dyno Technology salesperson, Meg Ryan, who indicated that purchasing the scanner in 2013 from Picard Inc. was a mistake. She points out that Dyno has a scanner that will save Benson Hospital $30,000 a year in operating expenses over its 3-year useful life. She notes that the new scanner will cost $110,000 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Ryan agrees to buy the old scanner from Benson Hospital for $40,000. Instructions a) Using incremental analysis, determine if Benson Hospital should purchase the new scanner on January 2, 2014. b) Should Benson Hospital purchase the new scanner or not? Support your answer by referring to the incremental analysis in (a). QUESTION 3 - RETAIN OR REPLACE Retain Scanner Replace Scanner Net Income Increase (Decrease) Annual operating costs New scanner cost Old scanner salvage Total b) Should Benson Hospital purchase the new scanner or not? Support your answer by referring to the incremental analysis in (a)