Replacing Old Equipment at an Immediate Cost of $75 000

Question

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The Answer is Outlays: FV = $10 000; I/Y = 11.4%; P/Y = C/Y = 1; n = 6(1) = 6;
PV = 10 000

Outlays: FV = $10 000; I/Y = 11.4%; P/Y = C/Y = 1; n = 6(1) = 6; PV = 10 000 = $5232.25 PV<sub>OUT =</sub> 75 000 + 5232.25 = $80 232 Inflows: PMT = $3 120; P/Y = 4; C/Y = 1; c = = 0.25; n = 4(11) = 44; p = - 1 = .0273568 PV = 3120 = $79 266.63 = $79 267 PV<sub>In =</sub> $79 267 NPV = 79 267 - 80 232 = -$965 < 0, The equipment shouldn't be replaced at the current rate of return.

= $5232.25
PV_{OUT =} 75 000 + 5232.25 = $80 232
Inflows: PMT = $3 120; P/Y = 4; C/Y = 1; c = Outlays: FV = $10 000; I/Y = 11.4%; P/Y = C/Y = 1; n = 6(1) = 6; PV = 10 000 = $5232.25 PVOUT = 75 000 + 5232.25 = $80 232 Inflows: PMT = $3 120; P/Y = 4; C/Y = 1; c = = 0.25; n = 4(11) = 44; p = - 1 = .0273568 PV = 3120 = $79 266.63 = $79 267 PVIn = $79 267 NPV = 79 267 - 80 232 = -$965 < 0, The equipment shouldn't be replaced at the current rate of return.

= 0.25; n = 4(11) = 44;
p = Outlays: FV = $10 000; I/Y = 11.4%; P/Y = C/Y = 1; n = 6(1) = 6; PV = 10 000 = $5232.25 PVOUT = 75 000 + 5232.25 = $80 232 Inflows: PMT = $3 120; P/Y = 4; C/Y = 1; c = = 0.25; n = 4(11) = 44; p = - 1 = .0273568 PV = 3120 = $79 266.63 = $79 267 PVIn = $79 267 NPV = 79 267 - 80 232 = -$965 < 0, The equipment shouldn't be replaced at the current rate of return.

- 1 = .0273568
PV = 3120 Outlays: FV = $10 000; I/Y = 11.4%; P/Y = C/Y = 1; n = 6(1) = 6; PV = 10 000 = $5232.25 PVOUT = 75 000 + 5232.25 = $80 232 Inflows: PMT = $3 120; P/Y = 4; C/Y = 1; c = = 0.25; n = 4(11) = 44; p = - 1 = .0273568 PV = 3120 = $79 266.63 = $79 267 PVIn = $79 267 NPV = 79 267 - 80 232 = -$965 < 0, The equipment shouldn't be replaced at the current rate of return.

= $79 266.63 = $79 267
PV_{In =} $79 267
NPV = 79 267 - 80 232 = -$965 < 0, The equipment shouldn't be replaced at the current rate of return.

Replacing Old Equipment at an Immediate Cost of $75 000

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Replacing Old Equipment at an Immediate Cost of $75 000

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Correct Answer:
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