)Your Company has some equipment that can either be repaired right now for $40.000 or sold for $13.000 scrap value. As an alternative. more units $14.000 salvage value in 8 years. Your Company discount rate is 796. What is the net present value of the decision to buy the new equipment instead of repairing the old equipment? me taxes in this problem.)t would be $6.500 less than the operating costs of the old machine. In addition. the new machine would be able to produce 100 me Your Company coule for a contribution margin of S80 per unit. The new equipment is expected to have a Id buy new equipment for $145.000. Both pieces o f equipment would last 8 years. The annual operating expenses of the new O $400 O $3.146 O $2.728 O (55.421)
)Your Company has some equipment that can either be repaired right now for $40.000 or sold for $13.000 scrap value. As an alternative. more units $14.000 salvage value in 8 years. Your Company discount rate is 796. What is the net present value of the decision to buy the new equipment instead of repairing the old equipment? me taxes in this problem.)t would be $6.500 less than the operating costs of the old machine. In addition. the new machine would be able to produce 100 me Your Company coule for a contribution margin of S80 per unit. The new equipment is expected to have a Id buy new equipment for $145.000. Both pieces o f equipment would last 8 years. The annual operating expenses of the new O $400 O $3.146 O $2.728 O (55.421)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:(Ignore income taxes in this problem.) Your Company has some equipment that can either be repaired right now for $40,000 or sold for $13,000 scrap value. As an alternative, Your Company could buy new equipment for $145,000. Both pieces of equipment would last 8 years. The annual
operating expenses of the new equipment would be $6,500 less than the operating costs of the old machine. In addition, the new machine would be able to produce 100 more units that can be sold for a contribution margin of $80 per unit. The new equipment is expected to have a
$14,000 salvage value in 8 years. Your Company discount rate is 7%. What is the net present value of the decision to buy the new equipment instead of repairing the old equipment?
O $400
O $3,146
O $2.728
O ($5,421)
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