Question 8 2.00000 points Save Answer A company owns a milling machine that it is considering replacing. Its current market value is $25,000, but it can be productively used for four more years at which time its market value will be zero. Operating and maintenance expenses are $50,000 per year. The company can purchase a new milling machine, with the same functionality as the current machine, for $90,000. In four years the market value of the new machine is estimated to be $45,000. Annual operating and maintenance costs will be $35,000 per year. Should the old milling machine be replaced using a before-tax MARR of 10% and a study period of four years? Attach File Browse My Computer Browse Content Collection
Annual savings in operating cost 15000 (50000-35000) Annuitiy for 10% for 4 years 3.1699 Present value of inflows 47548.5 Present value of salvage (45000*0.683) 30735 Total present value of inflows 78283.5 Less: Initial investment (Nnet) Total investment n new machine 90000 Lless: Salvage relaised of old 25000 65000 Net present value 13283.5 Yes, Old machine shall be replaced.
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