Solve and calculate the net present value

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Reference no: EM132481360

Magna 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$81,200 Cost$39,600

Accumulated depreciation$41,900

Estimated useful life8 yearsRemaining life8 years

Salvage value in 8 years$4,768

Current salvage value$10,600

Annual cash operating costs$29,00

0Salvage value in 8 years$0

Annual cash operating costs$35,300

Depreciation is $10,150 per year for the old equipment.

Point 1: The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,768.

Question 1: Calculate the net present value assuming a 17% rate of return (Ignore income taxes).

Reference no: EM132481360

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