X Company is trying to decide whether to continue using old equipment to make Product A or replace it with new equipment that will have lower operating costs. The following information is available: The new equipment will cost $52,000. Disposal value at the end of its 6-year useful life will be $5,000. The old equipment was purchased 3 years ago for $24,000. It can be sold immediately for $10,000 but will have zero disposal value in 6 years. Maintenance work, costing $2,000, will be necessary on the new equipment in Year 4. The new equipment will result in $9,500 of operating cost savings each year. Assuming a discount rate of 6%, what is the net present value of replacing the old equipment with the new equipment? [Note: Use the Present Value tables in the Coursepack.] 4752 Submit Answer Incorrect. Tries 1/3 Previous Tries Table 1: Present Value of $1.00 Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 1 0 .990 0.980 0,971 0.962 0.952 0.941 0.935 0.926 0917 | 0909 0.01 0.893 0.885 0.877 0.870 0.980 0.961 0.9430925 0.90708900873 0857 0.842 0.826 0.812 0.797 0.7830.7690 756 10.971 0.94209150289086408.000 816 0.7940.772 0.751 0.731 0.71206930 .6750658 0.961 0.9240888 ORS5 0821 0.792 0.761 0.715 0.70 063 0659 0.636 061305920572 0.951 0.906 0.863 022 0.784 0.747071306 0 650 0.621 593 567 0543OS190.497 0.9420 888 0817 0.790 0.746 0.705 066 06100596 0 564 0 5150 507 0.400 .456 0.432 7 0.9130871 0.813 0.7600.711 0665 0.621 OSR10547 053 0.482 0.452 0.425 0.400 0176 0.923 0.853 0.789073106770627058205.000 502 0.467 0.434 0.404 03760 351 0.127 9 0.9140837 0.766 0.70306450 $920540500 0.40 0 4240191 0.361 0.133 03080284 10 0.9050820 0.7440676 0.6140558 So 0461 0.422 0 1860 152 0.3220 2950 2700 247 110.896 0.804 0.722 0.650058505270475 0.419 UR 0 150 03170 287 0.261 0.2370215 120.887 0.788 0.701 0.625 05570.497 0.464 0.3970156 0319 0.2860 2570 2310 208 0.187 130.8790.773 0.681 0.601 05300459041503680126 0 2900 258 0.229 0.2040.1820 163 140.8700.758 0.661 0.5770 SOS0442038 0340 0.299 0.263 0232 0.205 0181 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% 11% 12% 13% 14% 15% 1 0.9200 9800.971 096209520943 0.935 0.926 0917 0.90909010.893 OR 0770570 1970 1.942 1913 1.886 1.859 18311 BOR 1.781 1.759 1.736 1.7131.690 1668 1 647 1626 3 2941282428292.775 2.723 2673 263425772531 | 2.487 2.444 2.4022161 2122 223 4 300230 3.717 1.630 3.5463.465 3.387 33123.240 3.1703 .102 3.037 29742914 2835 S 4853 4.7134380 4.452 432942124 100399118903 .791 3.696 3.6053517 3433 3352 6 5.795 5401 5417 5242 5.07649174 .76746234486 4355 4.23141113.99838893.784 7 6.7286.472623060025.786 55825 1895 206 501 4.8684 .712 4564 4423 424 4.160 8 76527,325 70206.7816.463 6.210 5.9715.7475 535 5335 5.146 4.968 4.299 4619 4487 9 8566 81627.786 74157108 6.802 6 515 6.2475.995 5.759 5517 5. 18 5.12496772 109.4718.933 8.500 RIL 7,7227.3607.0346.710 6.418 61455 895 650 5426 5216 5019 11101689.787 9251 8.76083067.8877 .499713968056.4956 207 5918 5687 5451 3214 1211255 10.5750954 93858 8638384 5021 7.9437.5367.161 | 6.814 6.4926 194 5918 SW 1312134 148 10 635 9.986 9.3948.85381587.9047.487 7.103 6.750 6.4346132584251 14 13.004 12.1061126 10 563 9.899 7.3676.926 638 630260025724 9.295 8.74582447.786
