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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 slaes calue 3,500
operating costs 64,000
new equipment
purchase cost $49,000
final slaes value 7,000
operating cost savings 9,500

Maintenance work will be necessary on the current equipment in Year 4, costing $3,000. The current equipment will last for 6 more years; the life of the new equipment is also 6 years. Assuming a discount rate of 7%, what is the net present value of replacing the current equipment?

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