Net present value of replacing current equipment

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Reference no: EM131899413

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment: Current equipment Current sales value $10,000 Final sales value 3,000 Operating costs 69,500 New equipment Purchase cost $48,000 Final sales value 7,000 Operating costs 60,500 Maintenance work will be necessary on the current equipment in Year 4, costing $4,000. The current equipment will last for 6 more years; the life of the new equipment is also 6 years. Assuming a discount rate of 5%, what is the net present value of replacing the current equipment?

Reference no: EM131899413

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