Evaluate asset replacement using payback and net present value (L.O. 3, 5)

Macro Company owns five machines that it uses in its manufacturing operations. Each of the machines was purchased four years ago at a cost of $120,000. Each machine has an estimated life of 10 years with no expected salvage value. A new machine has become available. One new machine has the same productive capacity as the five old machines combined; it can produce 800,000 units each year. The new machine will cost $648,000, is estimated to last six years, and will have a salvage value of $72,000. A trade-in allowance of $24,000 is available for each of the old machines.

These are the operating costs per unit:

Repairs Depreciation Power Other operating costs Operating costs per unit Five Old Machines S 06796 0.1500 0.1090 0.1620 51.1806 New Machine 5 0-0856 0.2400 0-1036 0.0496 5 0.4788