Carlson Manufacturing Has Some Equipment That Needs to Be Rebuilt

Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision: Carlson uses the total cost approach to net present value analysis and a discount rate of 12%. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing will have no future use for the equipment. If the equipment is rebuilt, the present value of the cash flows that occur now is:

A) ($55,000)
B) ($25,000)
C) ($16,000)
D) ($23,000)

Correct Answer:

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