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Eastbay Hospital has an auxiliary generator that is used when power failures occur. The generator is worn out and must be either overhauled or replaced
Eastbay Hospital has an auxiliary generator that is used when power failures occur. The generator is worn out and must be either overhauled or replaced with a new generator. The hospital has assembled the following information: Present Generator New Generator Purchase cost new $ 15,500 $ 19,000 Remaining book value $ 8,500 - Overhaul needed now $ 7,500 - Annual cash operating costs $ 15,500 $ 9,000 Salvage value-now $ 3,500 - Salvage value-nine years from now $ 2,500 $ 5,000 If the company keeps and overhauls its present generator, then the generator will be usable for nine more years. If a new generator is purchased, it will be used for nine years, after which it will be replaced. The new generator would be diesel-powered, resulting in a substantial reduction in annual operating costs, as shown above. The hospital computes depreciation on a straight-line basis. All equipment purchases are evaluated using a 16% discount rate. (Ignore income taxes.) Determine the net present value of both using the total-cost approach. Please show equations and work. The excel formula for NPV does not help me
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