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Arnold Company is considering purchasing new equipment to replace their old equipment. The pertinent information for the old equipment and the new equipment is as
Arnold Company is considering purchasing new equipment to replace their old equipment. The pertinent information for the old equipment and the new equipment is as follows: New Equipment Old Equipment Original Cost 62,000 Annual Variable Costs Materials 50,000 Labor 42,000 Annual Fixed Costs 18,000 Remaining Life 4 years Salvage Value at end of life. 6,000 20,000 12% 93,000 42,000 34,000 12,000 4 years 18,000 12% Salvage Value if sold now Required Return Create a computer spreadsheet to calculate the Net Present Value of the New Machine. Ignore tax consequences. Net Initial Cost Annual Savings Differential Salvage Value at end of life Net Present Value Dollar Amount (73,000) Present Value Factor Present Value (73,000) 1,447
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