Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
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Current Machine
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New Machine
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Original purchase cost
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$ 15,000
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$ 24,800
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Accumulated depreciation
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$ 5,700
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_
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Estimated annual operating costs
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$ 25,000
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$ 19,700
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Remaining useful life
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5 years
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5 years
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If sold now, the current machine would have a salvage value of $ 8,900 . If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.
Should the current machine be replaced? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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Retain Machine
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Replace Machine
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Net income increase(or decrease)
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Operating Costs
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?
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?
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?
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New Machine cost
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?
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?
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?
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Salvage Value(Old)
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?
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?
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?
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Total
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?
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?
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?
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The current machine should be=  replaced Or retained .
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