FBC corporation has purchased a machine 7 years ago for $630000 has been depreciated to a book value of $ 450000. It originally had a projected life of 10 years and salvage value of Tk. 30000. A new machine will cost $ 680000 and result in a reduced operating cost of $ 190000 per year for the next 5 years. The older machine could be sold for $ 470000. The cost of capital is 12%. The new machine will be depreciated on a straight-line basis over 5 years life with $ 40000 salvage value. The company tax rate is 40%. Calculate Net Present Value (NPV). 

Determine whether the old machine should be replaced or not?

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YEAR PVIF at 12% 3 .712 2.402 .893 .797 .636 567 PVIFA at 12% .893 1.690 3.037 3.605 YEAR PVIF at 12% 3 .712 2.402 .893 .797 .636 567 PVIFA at 12% .893 1.690 3.037 3.605

Answer rating: 100% (QA)

Calauabon of Net poresent Value Initial Investment cast of New Machine 680000 Lessi Sale of old ... View the full answer