Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million
Posted: Sun Jun 05, 2022 7:57 pm
Hillsong Inc. manufactures snowsuits. Hillsong is considering
purchasing a new sewing machine at a cost of $2.45 million. Its
existing machine was purchased five years ago at a price of $1.8
million; six months ago, Hillsong spent $55,000 to keep it
operational. The existing sewing machine can be sold today for
$245,090. The new sewing machine would require a one-time, $85,000
training cost. Operating costs would decrease by the following
amounts for years 1 to 7: Year 1 $389,800 2 399,800 3 410,200 4
425,400 5 432,400 6 435,000 7 436,000 The new sewing machine would
be depreciated according to the declining-balance method at a rate
of 20%. The salvage value is expected to be $380,800. This new
equipment would require maintenance costs of $99,000 at the end of
the fifth year. The cost of capital is 9%. Click here to view PV
table. Use the net present value method to determine the following:
(If net present value is negative then enter with negative sign
preceding the number e.g. -45 or parentheses e.g. (45). Round
present value answer to 0 decimal places, e.g. 125. For calculation
purposes, use 5 decimal places as displayed in the factor table
provided.) Calculate the net present value. Net present value
$enter the net present value in dollars rounded to 0 decimal
places
purchasing a new sewing machine at a cost of $2.45 million. Its
existing machine was purchased five years ago at a price of $1.8
million; six months ago, Hillsong spent $55,000 to keep it
operational. The existing sewing machine can be sold today for
$245,090. The new sewing machine would require a one-time, $85,000
training cost. Operating costs would decrease by the following
amounts for years 1 to 7: Year 1 $389,800 2 399,800 3 410,200 4
425,400 5 432,400 6 435,000 7 436,000 The new sewing machine would
be depreciated according to the declining-balance method at a rate
of 20%. The salvage value is expected to be $380,800. This new
equipment would require maintenance costs of $99,000 at the end of
the fifth year. The cost of capital is 9%. Click here to view PV
table. Use the net present value method to determine the following:
(If net present value is negative then enter with negative sign
preceding the number e.g. -45 or parentheses e.g. (45). Round
present value answer to 0 decimal places, e.g. 125. For calculation
purposes, use 5 decimal places as displayed in the factor table
provided.) Calculate the net present value. Net present value
$enter the net present value in dollars rounded to 0 decimal
places