Ignore income taxes in this problem.) Your Company has a telephone system that is in poor condition. The system must be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives: Present System Proposed New System Purchase cost when new $100,000 $110,000 Accumulated depreciation 90,000 Overhaul cost needed now 80,000 Working capital required 50,000 Annual cash operating costs 30,000 20,000 Salvage value now of old system 10,000 Salvage value in 8 years 2,000 15,000 Your Company uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. What is the net present value of the new system alternative? Enter your answer without dollar signs. If the NPV is negative enter with a minus sign in front.
(Ignore income taxes in this problem.) Your Company has a telephone system that is in poor condition. The system must be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:
|
|
|
Present System |
Proposed New System |
|
|
Purchase cost when new |
$100,000 |
$110,000 |
|
|
Accumulated |
90,000 |
|
|
|
Overhaul cost needed now |
80,000 |
|
|
|
Working capital required |
|
50,000 |
|
|
Annual cash operating costs |
30,000 |
20,000 |
|
|
Salvage value now of old system |
|
10,000 |
|
|
Salvage value in 8 years |
2,000 |
15,000 |
Your Company uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. What is the
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