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X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $50,000 per year. The new machine will cost $70,000 and will last for 5 years, at which time it can be sold for $1,500. The current machine will also last for 5 more years but will have zero salvage value. Its current disposal value is $8,000. Assuming a discount rate of 6%, what is the difference between the net present value if X Company replaces the current machine and the net present value if it keeps the current machine?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9956825

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