X Company must decide whether to continue using its current equipment or replace it with...
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Accounting
X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:
Current equipment
Current sales value $10,000
Final sales value 4,000
Operating costs 61,000
New equipment
Purchase cost $49,000
Final sales value 6,000
Operating costs 52,000
Maintenance work will be necessary on the current equipment in Year 3, costing $3,500. The current equipment will last for 6 more years; the life of the new equipment is also 6 years. Assuming a discount rate of 8%, what is the net present value of replacing the current equipment?
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