How calculate the net present value in dollars

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Magenta Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment:

Old Equipment                            New Equipment

Cost  $81,120                                 Cost $38,800

Accumulated depreciation $40,700   Estimated useful life 8 years

Remaining life 8 years                Salvage value in 8 years $4,800

Current salvage value $10,180      Annual cash operating costs $29,900

Salvage value in 8 years                 $0

Annual cash operating costs $35,300

Depreciation is $10,140 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,800.

Question a: Calculate the net present value in dollars , assuming a 15% rate of return. (Ignore income taxes.)

Reference no: EM132590902

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