Need some help with a problem around an equipment replacement decision.

Equipment replacement decision Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide 6 more years of service if $8,700 of major repairs are performed in 2 years. Annual cash operating costs total $27,800. Columbia can sell the equipment now for $36,000; the estimated residual value in 6 years is $5,000. New equipment is available that will reduce annual cash operating costs to $22,050. The equipment costs $103,000, has a service life of 6 years, and has an estimated residual value of $13,000. Company sales will total $430,000 per year with either the existing or the new equipment. Columbia has a minimum desired return of 12% and depreciates all equipment by the straight-line method. Instructions a By using the net present value method, determine whether Columbia should keep its present equipment or acquire the new equipment. Round all calculations to the nearest dollar, and ignore income taxes. b Columbia's management believes that the time value of money should be considered in all long-term decisions. Briefly discuss the rationale that underlies management's belief. Keep Equipment: Year 1 costs Year 2 cost Year 3 costs Year 4 costs Year 5 costs Year 6 costs Net Present Value of costs Note: Disregard the sale amount, that will be used if we buy new equipment. Instead treat the residual value as the final cash inflow. Buy Equipment: Year 1 costs Year 2 costs Year 3 costs Year 4 costs Year 5 costs Year 6 costs Net Present Value of costs Add purchase amount Add sale amount Net Present Value of costs Note: The yearly costs are added and are a negative cash flow. The cost of the new machine is also negative and the sale of the equipment is positive. Both the purchase and sale are treated as cash flows as of today. Columbia's management believes that the time value of money should be considered in all long-term decisions. Briefly discuss the rationale that underlies management's belief