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X Company is trying to decide whether to continue using old equipment to make Product...

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Accounting

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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 $45,000. Disposal value at the end of its 5-year useful life will be $6,500. The old equipment was purchased 3 years ago for $24,000. It can be sold immediately for $5,000 but will have zero disposal value in 5 years. Maintenance work, costing $3,500, will be necessary on the old equipment in Year 4. The new equipment will result in $9,000 of operating cost savings each year. Assuming a discount rate of 5%, what is the net present value of replacing the old equipment with the new equipment? [Note: Use the Present Value tables in the Coursepack.] D: $6,938 C: $5,550 E: $8,672 F: $10,840 A: $3,552 Submit Answer B: $4,440 Tries 0/99 Send Feedback 2 Communication Blocked

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