Minimization of overall costs of photocopying operations

Question

Problem: Consider these data regarding Douglas County's photocopying requirements:

                                          Old Equipment    Proposed Replacement Equipment
Useful life, in years                       5                                    3
Current age, in years                    2                                    0
Useful life remaining, in years        3                                    3
Original cost                             $25,000                          $15,000
Accumulated depreciation            10,000                              0
Book value                                 15,000                    Not acquired yet
Disposal value (in cash) now         3,000                     Not acquired yet
Disposal value in 3 years                0                                    0
Annual cash operating costs
for power, maintenance, toner
and supplies                               14,000                             7,500

Question 1. Suppose the "decision model" favored by top management consisted of a comparison of a three-year accumulation of cash under each alternative. As the manager of office operations, which alternative would you chose? Why?

Question 2. Suppose the "performance evaluation model" emphasized the minimization of overall costs of photocopying operations for the first year. Which alternative would you choose?