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Clean Duds Laundromat has an industrial water softener that enhances the water quality used in its washing machines. The water softener is approaching the end
Clean Duds Laundromat has an industrial water softener that enhances the water quality used in its washing machines. The water softener is approaching the end of its useful life and must be either overhauled or replaced. Details ofthe two alternatives are shown below. lfthe company overhauls its current water softener, then it will be usable for eight more years. If, instead, a new water softener is purchased, it will be used for eight years, after which it will be replaced. The new water softener will be considerably more energy efficient, resulting in a substantial reduction in annual operating costs, as shown below: Current New Water Water Softener Softener Purchase cost new $22,888 $31,888 Remaining book value $18,588 Overhaul needed now $11,888 Annual cash operating costs $13,888 $ 8,788 Salvage value now $ 4,888 Salvage value eight years from now $ 2,488 $ 5,888 Clean Duds computes depreciation on a straight-line basis. All equipment purchases are evaluated using a 15% discount rate. Required: (Ignore income taxes.) 1-a. Determine the present value of net cash flows using the total-cost approach. (Hint Use Microsoft Excel to calculate the discount factor(s).} (Enter any cash outflows with a minus sign. Do not round intermediate calculations and round nal answers to the nearest dollar amount.) 6 Answer is complete but not entirely correct. Purchase the new softener $ 68,551 9 Upgrade and Keep the old softener $ 63'3\" a
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