Question
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $68,000 per year;
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $68,000 per year; operating costs with the new machine are expected to be $42,000 per year. The new machine will cost $71,000 and will last for 5 years, at which time it can be sold for $4,000. The current machine will also last for 5 more years but will have zero salvage value. Its current disposal value is $4,000.
Assuming a discount rate of 8%, what is the net present value of replacing the current machine? [Note: For the capital budgeting questions, use the Present Value tables]
A. $29,731 B. $39,542 C. $52,591 D. $69,946 E. $93,028 F. $123,727
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