(Ignore income taxes in this problem) The malaise prevention agency is a non-pro

Q: Ignore income taxes in this problem) The malaise prevention agency is a non-pro

Years amount Factor@14% PV Initial investment 0 -45,000 1.0000 45,000 Annual cost savings (12,000 – 7,000) 1-8 5,000 4.639 23,195 Salvage value 8 6,000 .351 2,106 NPV (19,699) Cost to overhaul old press 20,000 NPV new machine (19,699) Net NPV 301 Answer option A Years amount Factor@14% PV Initial investment 0 -45,000 1.0000 45,000 Annual cost savings (12,000 – 7,000) 1-8 5,000 4.639 23,195 Salvage value 8 6,000 .351 2,106 NPV (19,699)

ID: 2491029 • Letter: #

Question

(Ignore income taxes in this problem) The malaise prevention agency is a non-profit organization that does all of its own informational printing. The printing press that Malaise currently is using needs a $20,000 overhaul. This will exceed the useful life of the press by 8 years. As an alternative, Malaise could buy a brand new modern press for $45,000. The new press would also last 8 years. The annual operating expenses of the old press are $12,000. The annual operating expenses of the new press will only be $7,000. The old press is not expected to have a salvage value after in 8 years. The new press is expected to have a $6,000 salvage value in 8 years. Malaise's discount rate is 14% The net present value of the decision to buy the new press instead of overhauling the old press is closest to:

A) $301

B) $ (301)

C $4195

D $ (46,089)

Please be detailed in what steps to take to solve this problem and how to lay it out

Explanation / Answer

Years

amount

Factor@14%

Initial investment

-45,000

1.0000

45,000

Annual cost savings

(12,000 – 7,000)

1-8

5,000

4.639

23,195

Salvage value

6,000

.351

2,106

NPV

(19,699)

Cost to overhaul old press 20,000

NPV new machine (19,699)

Net NPV 301

Answer option A