NPV Total and Differential Analysis of Replacement Decision

repairs one year from now predicted to cost $$120,000.$

Required

a$.$ Use the total cost approach to evaluate the alternatives of keeping the old compressor and purchasing the new compressor. Indicate which alternative is preferred.

Hint: Use a negative sign to indicate a negative net present value.

Net present value of operating costs of keeping old compressor: $$0$

Net present value of purchasing and operating new compressor: $$0$

Net savings of

b$.$ Use the differential cost approach to evaluate the desirability of purchasing the new compressor.

Note: There may be slight differences between your answers in part a and part b due to rounding.

Note: Round each of your answers below to the nearest whole dollar.

Net savings of