Homework Answers
Que 1)
| Year | Cash flow | Present value factor@ 8% | Discounted Value |
|---|---|---|---|
| 1 | 1500 | 0.9259 | 1388.85 |
| 2 | 2000 | 0.8573 | 1714.6 |
| 3 | 2500 | 0.7938 | 1984.5 |
| 4 | 3000 | 0.7350 | 2205 |
| 5 | 3500 | 0.6806 | 2382.1 |
| 6 | 4000 | 0.6302 | 2520.8 |
| 7 | 4500 | 0.5835 | 2625.75 |
| 8 | 5000 | 0.5403 | 2701.5 |
| 17523 |
Cost of New Loader = $18000
Present value of additional maintenance cost of old Loader = $ 17523
So, old Loader is beneficial since it saves $477 (18000 - 17523).
Company should keep the old one.
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