Consider these data regarding Douglas County's photocopying requirements: Proposed Replacement Old Equipment Equipment Useful life, in years
Question:
Consider these data regarding Douglas County's photocopying requirements:
Proposed Replacement
Old Equipment Equipment
Useful life, in years 5 3
Current age, in years 2 0
Useful life remaining, in years 3 3
Original cost $34,000 $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,
maintenance, toner, and supplies 17,000 11,000
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.
Prepare a schedule that compares all relevant items for the next 3 years together. What are total costs for Keep machine alternative?
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim