X Company is trying to decide whether to continue using old equipment to make Product...
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X Company is trying to decide whether to continue using old equipment to make Product A or replace it with new equipment that will have lower operating costs. The following information is available: The new equipment will cost $46,000. Disposal value at the end of its 5-year useful life will be $5,000. The old equipment was purchased 3 years ago for $21,000. It can be sold immediately for $5,000 but will have zero disposal value in 5 years. Maintenance work, costing $2,000, will be necessary on the old equipment in Year 4. The new equipment will result in $8,500 of operating cost savings each year. Assuming a discount rate of 4%, what is the net present value of replacing the old equipment with the new equipment? [Note: Use the Present Value tables in the Coursepack.] A: $1,633 B: $1,845C: $2,085 OD: $2,356 OE: $2,662 OF: $3,008
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