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Help with this question please L026-2 through L026-4 CASE 26.1 How Much...

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Accounting

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L026-2 through L026-4 CASE 26.1 How Much Is That Laser in the Window? The management of Metro Printers is considering a proposal to replace some existing equip- ment with a new highly efficient laser printer. The existing equipment has a current book value of $2,200,000 and a remaining life (if not replaced) of 10 years. The laser printer has a cost of $1,300,000 and an expected useful life of 10 years. The laser printer would increase the company's annual cash flows by reducing operating costs and by increasing the company's ability to gener- ate revenue. Susan Mills, controller of Metro Printers, has prepared the following estimates of the laser printer's effect on annual earnings and cash flow: Estimated increase in annual cash flows (before taxes) Reduction in annual depreciation expense Estimated increase in income before income taxes . _ . Increase in annual income taxes (40%) . . . . . . . . . . . . . . . . . . . . Estimated increase in annual net income. . . . . . . . . . . . . . .. . Estimated increase in annual net cash flows 90,000 $340,000 136,000 $204,000 $114,000

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