8 ptX Company is considering replacing oe of its machines in ordey to sive opera

Question

8 ptX Company is considering replacing oe of its machines in ordey to sive operating costs. Operating conts with the ('llrrent machine are $70 (XX) per ven r: ()I)(ratilig costs with the nevv 111?( 11]le are ("X])( (t("(l t() be $49.000 ])er vear. The new 111aclilne will cost $67,000 and will last for 4 vears, it which t???, il call be s(11 for $1.000. The current înachle will ilso last for 4 more years but will llave zer( ) salvag(, valile. Its ('lll] (11 t (lisposal val le Is $6.000. Ass1 111 111)g n (liscount rat(! of 7% what is the difference between the net present valne if X Company replaces the current machine and the net preseut valhe if it·keeps the C111.rent ]nachine.? . AO 10,890 BO S15,790 CO $22.896 DO S33.200 EO $18.139 FO S69.802

Explanation / Answer

Option A: $10890 is Correct.

Current Costs : Old Machine = $ 6000 New Machine = $ 67,000 Difference = 6000 - 67000 = - $ 61,000 Benefits: Year 1 to Year 4= 70,000 - 49,000 = $21,000 Year 4= 1,000

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