A Firm Is Considering the Cost-Saving Project of Replacing an Existing

question 187

Essay

A firm is considering the cost-saving project of replacing an existing copier with a new copier. The existing copier was purchased 8 years ago for $100,000 and was expected to last 20 years over which straight-line depreciation was used. This existing copier can now be sold for $10,000. The new machine costs $120,000, will last 12 years, and is expected to save the firm $20,000 each year before taxes. Assuming a tax rate of 34%, a discount rate of 10% and zero salvage for the new machine at the end of its life, what is the NPV for this project?

---

Definitions:

Bicycles

Human-powered, pedal-driven vehicles with two wheels attached to a frame, used for transportation, recreation, or sport.

Production

The process of creating goods and services from various input resources like labor, raw materials, and machinery.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing one option over another.

Leather Boots

Footwear made from the hide of animals, treated for durability and aesthetics, often chosen for protection or style.