The universitys 4 canon machines were purchased for 9600

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Reference no: EM13600234

Northern Illinois University is considering replacing some Canon copiers with faster copiers purchased from Kodak.

The university's 4 Canon machines were purchased for $9,600 each, 4 years ago. They had an expected life of 11 years. They can be sold immediately for a total of $4,000; their resale value in 7 more years will be zero. The total cost of the new Kodak equipment will be $75,000; the equipment will have a life of 7 years and a total disposal value at that time of $2,700.

The 4 Canon operators are paid $8.40 an hour each. They work a 39-hour week and 51 weeks a year. The machines break down periodically, resulting in annual repair costs of $1,260 for each machine. Supplies cost $1,440 a year for each Canon copier.
The Kodak system will require only 3 regular operators to do the same work. Rates are $9.60 an hour. Kodak has offered Northern Illinois a maintenance contract that covers all machine breakdowns; the cost of the contract is $95 per month. Total cost for all supplies will be $320 per month.

QUESTION:

Assuming a discount rate of 10%, compute the difference between the net present value if Northern Illinois keeps the Canon copiers and the net present value if it buys the Kodak copiers.

Reference no: EM13600234

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