Net present value Lakeside, Inc., is considering replacing old production equipment with state-of-the-art technology that will allow

Question:

Net present value Lakeside, Inc., is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of$10,000 per month. The new equipment will have a five-year life and cost $450,000, with an estimated salvage value of $30,000. Lakeside's cost of capital is 10%.

Required:

Calculate the Net present value of the new production equipment.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...