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Author Question: ABC Boat Company is interested in replacing a molding machine with a new improved model. The old ... (Read 269 times)

dejastew

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ABC Boat Company is interested in replacing a molding machine with a new improved model. The old machine has a salvage value of $10,000 now and a predicted salvage value of $4,000 in six years, if rebuilt. If the old machine is kept, it must be rebuilt in one year at a predicted cost of $20,000.
 
The new machine costs $80,000 and has a predicted salvage value of $12,000 at the end of six years. If purchased, the new machine will allow cash savings of $20,000 for each of the first three years, and $10,000 for each year of its remaining six-year life. 

Required: 
What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?


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Marked as best answer by dejastew on Mar 6, 2021

phuda

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dejastew

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Reply 2 on: Mar 6, 2021
Great answer, keep it coming :)


miss_1456@hotmail.com

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

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