Which of the following amounts would be used in the calculation of the net prese

Question

Which of the following amounts would be used in the calculation of the net present value of an investment in new machinery to replace old machinery (incremental cost approach)? The useful life of the new machinery is 8 years and the remaining useful life of the old machinery is 8 years. Ignore income tax considerations.

A) The increase in depreciation expense on the new machinery compared to the old machinery. B) The cost of a major maintenance upgrade on the old machinery needed in 3 years. C) The salvage value of the new machinery in 3 years. D) Both A and B above E) All of the above Which of the following amounts would be used in the calculation of the net present value of an investment in new machinery to replace old machinery (incremental cost approach)? The useful life of the new machinery is 8 years and the remaining useful life of the old machinery is 8 years. Ignore income tax considerations. The increase in depreciation expense on the new machinery compared to the old machinery. The cost of a major maintenance upgrade on the old machinery needed in 3 years. The salvage value of the new machinery in 3 years. Both A and B above All of the above

Explanation / Answer

D) Both A and B above

This is because salvage value after 3 years is not a concern while calculating NPV

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