Assuming a discount rate of 14 compute the difference

Reference no: EM13577251

The Lansing Community College registrar's office is considering replacing some Canon copiers with faster copiers purchased from Kodak.

The office's 4 Canon machines are expected to last 5 more years. They can each be sold immediately for $800; their resale value in 5 years will be zero. The total cost of the new Kodak equipment will be $114,000; the equipment will have a life of 5 years and a total disposal value at that time of $1,900.

The 4 Canon operators are paid $8.10 an hour each. They work a 39-hour week and 50 weeks a year. The machines break down periodically, resulting in annual repair costs of $960 for each machine. Supplies cost $960 a year for each machine.

The Kodak system will require only 3 regular operators to do the same work. Kodak has offered the college a maintenance contract that covers all machine breakdowns; the cost of the contract is $900 per year. Total cost for all supplies will be $3,240 per year.

Required
Assuming a discount rate of 14%, compute the difference between the net present value if the registrar's office keeps the Canon copiers and the net present value if it buys the Kodak copiers. [Note: If your results favor keeping the Canon copiers, enter your net present value difference as a positive number; if your results favor buying the Kodak copiers, enter your net present value difference as a negative number.]

Reference no: EM13577251

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