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Feed the Hungry Foundation is a non-profit organization that has a cost of capital of 8 percent. The foundation is considering the replacement of piece of equipment. The old machine has a book value...

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Feed the Hungry Foundation is a non-profit organization that has a cost of capital of 8 percent. The foundation is considering the replacement of piece of equipment. The old machine has a book value of $3,000 and a remaining estimated life of 5 years with no salvage value at that time. The salvage value of the old machine is currently $1,500. The new equipment will cost $10,000. It has an estimated life of 5 years with no salvage value then. Annual cash operating costs are $4,000 for the old machine and $2,000 for the new machine. Hint: Use the Present Value Tables in the back of the text book.
a. What is the present value of the operating cash outflows for the old machine?b. What is the present value of the operating cash outflows for the new machine?c.What is the present value of salvage value of the old machine if it is replaced now?d. Would you advise the organization to replace the machine?
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Answered Same Day Dec 24, 2021

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Robert answered on Dec 24 2021
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