Npv of purchasing the new machineskates company is

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Reference no: EM13355793

NPV of purchasing the new machine.

Skates Company is interested in replacing a molding machine with a new improved model. The old machine has a salvage value of $20,000 now and a predicted salvage value of $4,000 in six years, if rebuilt. If the old machine is kept, it must be rebuilt in one year at a predicted cost of $40,000.

The new machine costs $160,000 and has a predicted salvage value of $24,000 at the end of six years. If purchased, the new machine will allow cash savings of $40,000 for each of the first three years, and $20,000 for each year of its remaining six-year life.

What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?

Reference no: EM13355793

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