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One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just two years earlier for $45,000. The company must either
One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just two years earlier for $45,000. The company must either repair the machine or purchase a new machine. The estimated cost of repairing the machine is $22,000, after which operating costs will be $69,000 a year. It will also require a maintenance check in the second year that is estimated to cost $2,500. A new machine will cost $81,000, but it will be more efficient than the repaired machine, with annual operating cost savings of $17,000. Both the repaired machine and the new machine will last for four years, at which time the repaired one would be worthless, and new one would be worth $6,000. If it is not repaired, the damaged machine can be sold immediately for $6,000. Assuming a discount rate of 6%, what is the net present value of repairing the damaged machine instead of buying the new machine? [Use the present value tables in the Coursepack.] OA: $-5,276 OB: $-6,596 OC: $-8,244 OD: $-10,306 | OE: $-12,882 OF: $-16,102 Submit Answer Tries 0/99
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