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What is net present value of replacing the current machine

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Question - X Company is unhappy with a machine that they bought just a year ago for $40,000. It is considering replacing it with a new machine that will save significant operating costs. Operating costs with the current machine are $65,000 per year; operating costs with the new machine are expected to be $45,000 per year. Both machines will last for 4 more years. The current machine can be sold immediately for $6,000 but will have no salvage value at the end of4 years. The new machine will cost $68,000 and have a salvage value of $1,000 in 4 years.

Assuming a discount rate of 4%, what is the net present value of replacing the current machine?

Reference no: EM132171028

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