Question: Dexter Inc. is considering replacing its existing computer system with a new computer system. The new system can offer considerable savings in computer processing and
Dexter Inc. is considering replacing its existing computer system with a new computer system. The new system can offer considerable savings in computer processing and inventory management costs. Information about the existing system and the new system follow: Existing Computer New Computer Original cost $20,000 $15,000 Annual operating cost $ 3,500 $ 2,000 Current salvage value of the existing system $ 4,000 --- Remaining life in 5 years 5 years 5 years Salvage value in 5 years $ 0 $ 0 Should Dexter replace the existing computer system with the new system? What are the cash flow savings or additional cost over the 5 years? Ignore income taxes. Group of answer choices No do not replace, additional costs of $5,000. No do not replace, additional costs of $3,500. Yes replace, net savings of $5,000. Yes replace, net savings of $15,000.
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