You Are Given the Following Present Value Factors at 8

question 1

Essay

You are given the following present value factors at 8 percent,the Rogers Company's minimum desired rate of return:
$\begin{array}{llr}&\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:

Mercury

A chemical element with the symbol Hg and atomic number 80, known as quicksilver; a heavy, silvery d-block element that is liquid at room temperature.

Helium

A colorless, odorless, tasteless, inert gas that is the second lightest element and found in abundance in the universe.

Coinage Metals

Coinage metals refer to metals that historically have been used to make coins, primarily including gold, silver, and copper due to their corrosion resistance and ease of workability.

Copper

A ductile, malleable, reddish-brown metallic element with good electrical and thermal conductivity, used in electrical wiring and coinage.