One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just two years earlier for $50,000. The company must either repair the machine or purchase a new machine. The estimated cost of repairing the machine is $25,000, after which operating costs will be $62,000 a year. It will also require a maintenance check in the second year that is estimated to cost $3,500. A new machine will cost $85,000, but it will be more efficient than the repaired machine, with annual operating costs of only $53,000. Both the repaired machine and the new machine will last for six years, at which time the repaired one would be worthless, and new one would be worth $6,500. If it is not repaired, the damaged machine can be sold immediately for $4,000. Assuming a discount rate of 5%, what is the net present value of buying the new machine instead of repairing the damaged machine? [Use the present value tables in the Coursepack.] Submit Answer Tries 0/5 8 9 0.502 0.460 0.422 10 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.789 0.766 0.744 0.722 0.701 0.681 0.853 0.837 0.820 0.804 0.788 0.773 0.758 11 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.467 0.434 0.424 0.391 0.386 0.352 0.350 0.317 0.286 0.290 0.258 0.263 0.232 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.351 0.308 0.270 0.237 0.208 0.182 0.327 0.284 0.247 0.215 0.187 0.163 0.388 0.356 0.326 0.299 12 13 0.319 14 0.661 0.160 0.141 Table 2: Present Value of an Annuity of $1.00 Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 13% 14% 15% 1 0.893 0.870 1.626 2 3 4 5 6 7 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 11% 0.909 0.901 1.736 1.713 2.487 2.444 3.170 3.102 3.791 3.696 4.355 4.231 4.868 4.712 5.335 5.146 5.759 5.537 6.145 5.889 6.495 6.207 6.814 6.492 7.103 6.750 7.367 6.982 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 8 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 9 10 11 12 13 14 10.563
