Marine Industrial Coatings, 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 ComputerNew ComputerOriginal cost$10,000$15,000Annual operating cost$3,500$2,000Current salvage value of the existing system$4,000---Remaining life in 5 years5 years5 yearsSalvage value in 5 years$0$0Should Marine Industrial Coatings 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.

Capital Budgeting helps in deciding whether to continue with the existing option or to purchase a…

Answered: Should Marine Industrial Coatings…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Marine Industrial Coatings, 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	$10,000	$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 Marine Industrial Coatings 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.

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