It is desired to determine the resent economic Value of an old machine by considering of how it compares with the best modern machine that could replace it. The old machine is expected to require out of pocket cost of 85,000 each year for 4 years and then be scared for 5,000 residual value. The new machine requires an investment of 40,000 and would have out of the pocket costs of 79,000 a year for 8 years and the zero-salvage value. Invested capital should earn a minimum return of 15% before taxes. Determine the present value of an old machine.
It is desired to determine the resent economic Value of an old machine by considering of how it compares with the best modern machine that could replace it. The old machine is expected to require out of pocket cost of 85,000 each year for 4 years and then be scared for 5,000 residual value. The new machine requires an investment of 40,000 and would have out of the pocket costs of 79,000 a year for 8 years and the zero-salvage value. Invested capital should earn a minimum return of 15% before taxes. Determine the present value of an old machine.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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It is desired to determine the resent economic Value of an old machine by considering of how it compares with the best modern machine that could replace it. The old machine is expected to require out of pocket cost of 85,000 each year for 4 years and then be scared for 5,000 residual value. The new machine requires an investment of 40,000 and would have out of the pocket costs of 79,000 a year for 8 years and the zero-salvage value. Invested capital should earn a minimum return of 15% before taxes. Determine the present value of an old machine.
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