ABC Boat Company Is Interested in Replacing a Molding Machine

question 119

Essay

ABC Boat Company is interested in replacing a molding machine with a new improved model. The old machine has a salvage value of $10,000 now and a predicted salvage value of $4,000 in six years, if rebuilt. If the old machine is kept, it must be rebuilt in one year at a predicted cost of $20,000.
The new machine costs $80,000 and has a predicted salvage value of $12,000 at the end of six years. If purchased, the new machine will allow cash savings of $20,000 for each of the first three years, and $10,000 for each year of its remaining six-year life.
Required:
What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?

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Definitions:

Multicultural Groups

Diverse groups consisting of people from a variety of cultural, racial, and ethnic backgrounds.

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A condition or system in which various cultural groups coexist respectfully and harmoniously within a society, acknowledging and valuing diversity.

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The belief that all events are predetermined and therefore inevitable, leading to a mindset where human actions cannot change outcomes.

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A philosophy or lifestyle emphasizing the pursuit of intense experiences and immediate gratification over long-term goals or caution.