Reference no: EM132500615

Magna Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment.

                               Old Equipment                                        New Equipment

Cost                          $81,200                                    Cost$39,600

Accumulated depreciation $41,900                                 Salvage value in 8 years $0

Estimated useful life8 years                                            Remaining life8 years

Salvage value in 8 years$4,768                                     Current salvage value$10,600

Annual cash operating costs$29,000                             Annual cash operating costs$35,300

• Depreciation is $10,150 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,768.

Question 1: Calculate the net present value assuming a 17% rate of return (Ignore income taxes).