Lake Torrens Boating Company is interested in replacing a moulding machine with a new improved model.The old machine has a salvage value of $20 000 now and a predicted salvage value of $4000 in six years,if rebuilt.If the old machine is kept,it must be rebuilt in one year at a predicted cost of $40 000.
The new machine costs $160 000 and has a predicted salvage value of $24 000 at the end of six years.If purchased,the new machine will allow cash savings of $40 000 for each of the first three years,and $20 000 for each year of its remaining six-year life.
Required:
What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?
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Question

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The Answer of Lake Torrens Boating Company is interested in replacing a moulding machine with a new improved model.The old machine has a salvage value of $20 000 now and a predicted salvage value of $4000 in six years,if rebuilt.If the old machine is kept,it must be rebuilt in one year at a predicted cost of $40 000.
The new machine costs $160 000 and has a predicted salvage value of $24 000 at the end of six years.If purchased,the new machine will allow cash savings of $40 000 for each of the first three years,and $20 000 for each year of its remaining six-year life.
Required:
What is the net present value of purchasing the new machine if the company has a required rate of return of 14%?
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Lake Torrens Boating Company Is Interested in Replacing a Moulding