Reference no: EM132640072

The law firm of Matadin and Howe relies heavily on a colour laser printer to process the paperwork. Recently the printer has not functioned well and print jobs were not being processed. Management is considering updating the printer with a faster model.

Problem 1: Prepare incremental analysis for decision to retain or replace equipment. Current Printer New Model

Original purchase cost       Accumulated depreciation         Estimated operating costs (annual)          Useful life
$30,000                                   17,000                                       3,000                                              4 years
$24,000                                         -                                        2,000                                           4 years

If sold now, the current printer would have a salvage value of $4,000. If operated for the remainder of its useful life, the current printer would have zero salvage value. The new printer is expected to have zero salvage value after four years.