Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Existing Machine $ 15,000 $ 6,000 $5,000 $ 10,500 $ 2,000 $1,000 New Machine $ 22,000 Purchase cost (new) Remaining book value. Overhaul needed now Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $ 6,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using the tables provided. If the company overhauls its existing machine, it will be usable for eight more years. If it bulys the new machine, it will be used for eight years. Assuming a discount rate of 16%, what is the net present value of the cash flows associated with keeping the existing machine? $ 7,000
Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Existing Machine $ 15,000 $ 6,000 $5,000 $ 10,500 $ 2,000 $1,000 New Machine $ 22,000 Purchase cost (new) Remaining book value. Overhaul needed now Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $ 6,000 Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using the tables provided. If the company overhauls its existing machine, it will be usable for eight more years. If it bulys the new machine, it will be used for eight years. Assuming a discount rate of 16%, what is the net present value of the cash flows associated with keeping the existing machine? $ 7,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: acounting
Transcribed Image Text:Multiple Choice
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$(48,307)
$(65,307)
$(44,307)
$(50,307)
Transcribed Image Text:Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the
two alternatives are summarized as follows:
Purchase cost (new)
Remaining book value.
Overhaul needed now
Existing
Machine
$ 15,000
$ 6,000
$5,000
$ 10,500
$ 2,000
$1,000
New Machine
$ 22,000
Annual cash operating costs
Salvage value (now)
Salvage value (eight years from now)
$ 6,000
Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s) using the tables provided.
If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a
discount rate of 16%, what is the net present value of the cash flows associated with keeping the existing machine?
$ 7,000
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