X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment.

Current equipment: | |

Current sales value | $10,000 |

Final sales value | $2,000 |

Operating costs | $69,500 |

New equipment: | |

Purchase cost | $51,000 |

Final sales value | $5,000 |

Operating cost savings | $9,500 |

Maintenance work will be necessary on the new equipment in Year 3, costing $3,500. The current equipment will last for 6 more years; the life of the new equipment is also 6 years. Assuming a discount rate of 8%, what is the net present value of replacing the current equipment?

LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $360,000 and will generate after-tax cash inflows of $62,650 per year for 8 years.

If the cost of capital is 10%, calculate the net present value (NPV) and indicate whether to accept or reject the machine.

Macaron Shoe Company is considering investing in one of two machines that attach heels to shoes. Machine A costs $70,360 and is expected to save the company $20,040 per year for 6 years. Machine B costs $101,090 and is expected to save the company $25,040 per year for 6 years.

Determine the net present value for each machine if the required rate of return is 11 percent.