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X Company is unhappy with a machine that they bought just a year ago for $45,000. It is considering replacing it with a new machine that will save significant operating costs. Operating costs with the current machine are $67,000 per year; operating costs with the new machine are expected to be $45,000 per year. Both machines will last for 6 more years.The current machine can be sold immediately for $7,000 but will have no salvage value at the end of 6 years. The new machine will cost $74,000 and have a salvage value of $1,500 in 6 years. Assuming a discount rate of 8%, what is the net present value of replacing the current machine?

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Patrina Schowalter
Patrina SchowalterLv2
28 Sep 2019

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