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%?

---

Definitions:

Heart Disease

A range of conditions that affect the heart, including blood vessel diseases, heart rhythm problems, and heart defects.

Inflames Arteries

A condition wherein the arterial walls become inflamed, potentially leading to atherosclerosis and cardiovascular diseases.

Type A Personality

A personality type characterized by high levels of competitiveness, self-urgency, and a constant sense of urgency.

Waste My Time

Engaging in activities or interactions that do not bring any value or positive outcome, often leading to frustration or regret.