You Are Given the Following Present Value Factors at 8

question 87

Essay

You are given the following present value factors at 8 percent,the Rogers Company's minimum desired rate of return:
$\begin{array}{ccc}&\text { Present Value of } \$ 1 & \text { Present Value of an }\\\text {End of Period}&&\text {Annuity of \( \$ 1 \)}\\1 & .926 & .926 \\2 & .857 & 1.783 \\3 & .794 & 2.577 \\4 & .735 & 3.312 \\5 & .681 & 3.993 \\6 & .630 & 4.623\end{array}$
The Rogers Company is considering the replacement of a piece of equipment.The old machine has a carrying value of $800 and a remaining estimated life of five years,with no residual value at that time.Present residual value is $200.The new equipment will cost $1,200,including transportation and installation.It has an estimated life of five years,with no residual value then.Annual cash operating costs are $400 for the old machine and $150 for the new machine.
a. Compute the present value of the operating cash outflows for the old machine.
b. Compute the present value of the operating cash outflows for the new machine.
c. Compute the present value of the cash operating savings if the new machine is purchased.
d. What is the net present value of the replacement alternative?

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Definitions:

Early Reflexes

Involuntary responses or movements that newborn babies exhibit, such as sucking, grasping, and stepping, which are essential for survival and development.

Voluntary Behavior

Actions that are performed as a result of conscious choice, control, or decision-making, contrasting with reflexive or automatic responses.

Innate Adaptive Responses

Natural or inborn reactions that have evolved to help an organism adjust or cope with changes in its environment.

Facial Expressions

Visibly communicated emotions or intentions through movements or positions of the muscles in the face.