Teal, a large manufacturing company, currently uses a large printing press in its operations and is considering two replacements: the PDX341 and PDW581. The PDX costs $484,000 and has annual maintenance costs of $8,400 for the first 5 years and $13,400 for the next 10 years. After 15 years, the PDX will be scrapped (salvage value is zero). In contrast, the PDW can be acquired for $121,000 and requires maintenance of $26,800 a year for its 10-year life. The salvage value of the PDW is expected to be zero in 10 years. Assuming that Teal must replace its current printing press (it has stopped functioning), has a(n) 10-percent cost of capital, and all cash flows are after tax, which replacement press is the most appropriate? (Round answers to 2 decimal places, e.g. 125.25.) Chain Replication Approach: NPV of PDX341 NPV of PDW581 We would prefer $ $ PDW581
Teal, a large manufacturing company, currently uses a large printing press in its operations and is considering two replacements: the PDX341 and PDW581. The PDX costs $484,000 and has annual maintenance costs of $8,400 for the first 5 years and $13,400 for the next 10 years. After 15 years, the PDX will be scrapped (salvage value is zero). In contrast, the PDW can be acquired for $121,000 and requires maintenance of $26,800 a year for its 10-year life. The salvage value of the PDW is expected to be zero in 10 years. Assuming that Teal must replace its current printing press (it has stopped functioning), has a(n) 10-percent cost of capital, and all cash flows are after tax, which replacement press is the most appropriate? (Round answers to 2 decimal places, e.g. 125.25.) Chain Replication Approach: NPV of PDX341 NPV of PDW581 We would prefer $ $ PDW581
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 9P
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