Moon City Enterprises Relies Heavily on a Copier Machine to Process

question 184

Essay

Moon City Enterprises relies heavily on a copier machine to process its paperwork. Recently the copy clerk has not been able to process all the necessary copies within the regular work week. Management is considering updating the copier machine with a faster model. $\begin{array}{lrr}& \text { Current Copier}&\text { New Model}\\ \text { Original purchase cost } & \$ 15,000 & \$ 21,000 \\\text { Accumulated depreciation } & 12,000 & - \\\text { Estimated operating costs (annual) } & 9,000 & 3,700 \\\text { Useful life } & 4 \text { years } & 4 \text { years }\end{array}$ If sold now the current copier would have a salvage value of $1000. 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 five years.
Instructions
Prepare an analysis to show whether the company should retain or replace the machine.

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Definitions:

Competitor

An entity that is in the same industry or market and vies for the same customers or resources.

Capital-Intensive

Describing industries or businesses that require a significant amount of capital investment to produce goods or services.