6-B5 Replacing Old Equipment Consider the following data regarding Orange County's photocopying requirements. Proposed Replacement Equipment Old Equipment Useful life, in years 5 Current age, in years 2 3 0 Useful life remaining, in years 3 Original cost $34,000 3 $14,700 Accumulated depreciation 13,600 0 Book value 20,400 Not acquired yet Disposal value (in cash) now 3,600 Not acquired yet Disposal value in 3 years 0 0 Annual cash operating costs for power, 17,000 11,000 maintenance, toner, and supplies The county administrator is trying to decide whether to replace the old equipment. Because of rapid changes in technology, she expects the replacement equipment to have only a 3-year useful life. Ignore the effects of taxes. 1. Prepare a schedule that compares both relevant and irrelevant items for the next 3 years. (Hint: See Exhibit 6-5, page 241.) 2. Prepare a schedule that compares all relevant items for the next 3 years. Which tabulation is clearer, this one or the one in requirement 1? (Hint: See Exhibit 6-6, page 242.) 3. Prepare a simple "shortcut" or direct analysis to support your choice of alternatives.