(Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision:

Carlson uses the total cost approach to net present value analysis and a discount rate of 12%. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing will have no future use for the equipment.
-If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is:

Question

(Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision:

Carlson uses the total cost approach to net present value analysis and a discount rate of 12%. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing will have no future use for the equipment.
-If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is:

Quizplus · Accepted Answer

The present value of the annual cash operating costs is calculated based on the given options, and $(28,840) is the correct value.

(Ignore Income Taxes in This Problem