What is the difference in present worth

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Reference no: EM132024778

Consider the following two options related to one of the old but special machine tools in your machine shop. -Option 1: You continue to use the old machine tool that was bought four years ago for $11,000. It has been fully depreciated but can be sold for $2,200. If kept, it could be used for 5 more years with proper maintenance and with some extra care. No salvage value is expected at the end of 5 years. The maintenance costs would run $13,000 per year for the old machine tool. -Option 2: You purchase a brand-new machine tool at a price of $16,000 to replace the present equipment, it also has an expected economic life of 5 years and will have a salvage value of $2,000 at the end of that time. With the new machine tool, the expected operating and maintenance costs (with the scrap savings) amount to $4,000 each year for 5 years. What is the DIFFERENCE IN PRESENT WORTH between the two alternatives at an interest rate of 14%? Enter your answer as a positive number.

Reference no: EM132024778

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