The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $910. One possible alternative is to invest in new machinery, which has a cost of $40,100. This new machinery would produce estimated annual operating cash savings of $13,050. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value of $2,110 at the end of four years. The investment in the new machinery would require an additional investment in working capital of $3,000, which would be recovered after four years. If the DOT accepts this investment proposal, disposal of the old machinery and investment in the new equipment will take place on December 31, 20x1. The cash flows from the investment will occur during the calendar years 20x2 through 20x5.

Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required:

Prepare a net-present-value analysis of the county DOTs machinery replacement decision. The county has a 10 percent hurdle rate. (Round your "Discount factors" to 3 decimal places and final dollar amounts to whole dollars. Negative amounts should be indicated by a minus sign.)

Time 0 Time 1 Time 2 Time 3 Time 4 Acquisition cost Investment in working capital Recovery of working capital Salvage value of old machinery Salvage value of new machinery Annual operating cash savings Total cash flow Discount factor Present value Net present value Future Value and Present Value Tables able I uo$1.01 125 1.191 1 301 1.464 1.406 1.482 1.728 1.30 1.762 2488 1712 2.196 1.584 2 360 2 594 24/6 2.773 3106 1.423 5.160 1.79 2332 1.732 2 201 20 2181 200 6720 able II 1.00 Ch lows 1000 1000 100) 2.100 4779 7330 T 716 13 580 960 12 21 35 21015 23276 15 20024 271 31773 37 260 56790 1,10100 15026 154.782 057 507 767000 1,342000 7,34ag00 9058 1132 149 241.330 Table III PresentVelue of $1.00 .7317 540 "201 .305 .206 210 201 .170 157 ,S39 123 100 13 .001 A09290 229 .182 .s45 .116 093 ,001 000 040 027 Table IV 1.00 Cash Faws Period 4%6%8%10% 12% 14% 169% 14% 20% 22% 24% 2. 3 2T75 2573 2577 24E7 2A 2 2322 2245 2.174 2.100 2042 1.981 1 2 1rea 1.808 1.8 4 36) 34 6 12 170 3,037 2914 2730 2e90 2509 2494 2,404 2382 200 2201 2.166 3274 3 522 4917 43E5 4.11 ang 366 2496 3308 3167 3000 2961 2 2754 2643 6247 5 4.086 3 13 998 63 7.904 7.10 6A24 842 342 4.910 4533 4200 3012 3790 3666 2427 3220 9818 8S1 4) 19. 15.0 6 11 925 779 8244 7105 62a4 5546 4.997 4564 4168 3999 3.ses a571 3.333