Question: X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:

Current equipment
Current sales value $10,000
Final sales value 5,000
Operating costs 60,000
New equipment
Purchase cost $46,000
Final sales value 5,000
Operating cost savings 8,500

Maintenance work will be necessary on the new equipment in Year 3, costing $4,000. The current equipment will last for five more years; the life of the new equipment is also five years. Assuming a discount rate of 6%, what is the net present value of replacing the current equipment?

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