CUS ON DECISION MAKING 6-B5 Replacing Old Equipment Consider the following data regarding Orange County's photocopying requirements. Old Equipment 5 Proposed Replacement Equipment Useful life, in years 2 0 Current age, in years 3 3 Useful life remaining, in years $34,000 $14,700 Original cost 13,600 0 Accumulated depreciation 20,400 Not acquired yet Book value 3,600 Disposal value (in cash) now Not acquired yet 0 Disposal value in 3 years 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 259.) 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 260.) 3. Prepare a simple "shortcut" or direct analysis to support your choice of alternatives