Company is trying to decide whether to continue using old equipment to make Product A...
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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 $50,000. Disposal value at the end of its 5-year useful life will be $6,000 The old equipment was purchased 3 years ago for $25,000. It can be sold immediately for $10,000 but will have zero disposal value in 5 years. Maintenance work, costing $4,000, will be necessary on the old equipment in Year 4. The new equipment will result in $9,500 of operating cost savings each year. Assuming a discount rate of 7%, what is the net present value of replacing the old equipment with the new equipment? [Note: Use the Present Value tables in the Coursepack.] 53.921 D: $4,588 E: $5,368 F: 56,280 A: 2,864 Submit Ar B: $3,351 t hes 0/99
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