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 $5,000
Final sales value 3,500
Operating costs 65,000
New equipment
Purchase cost $48,000
Final sales value 6,000
Operating cost savings 9,000

Maintenance work will be necessary on the new equipment in Year 3, costing $3,000. The current equipment will last for 6 more years; the life of the new equipment is also 6 years. Assuming a discount rate of 7%, what is the net present value of replacing the current equipment?

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