Question

Exercise 25-03 Your answer is partially correct. Try again. 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 $242,003. 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 2 $389,700 400,800 410,800 425,700 433,000 434,600 437,000 5 6 7 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 $380,100. This new equipment would require maintenance costs of $95,700 at the end of the fifth year. The cost of capital is 9%. Click here to view the factor 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 O 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

Answer 1

The net investorend Pin the new scoopg machine B Gianby = cost of the rear machen - scoongpolo rothe existing Selling rachpre + one-time toalling cost = $ 2.45 MOMED - $ 202,003 + 85000 - $2,292,907 yeao Nel cash flocos tous WN $ 389,700 400.800 $ 410,800 $425,700 $ 433,000 - 95700 = $337,300 $ 434,600 $4371000 + 380,100 = $817,00 The NPV for the new Machere coule a xeoterned by dedicado fing the PnP te cel povestmel form the sum of presel valled all tee prespective Coesh flowers as shocon below Net paesent value: - $ 389,700 $400,800 $410,800 $42700, 9337300 1.09 1.092 1993 1994 1.095 + $ 434,600 + $877,100 - $2292997 1.096 1096 7 - $357,523 +$336, 807+$ 316,000+ $ 301,915+$219026 +$ 258690+$ 446 503-12292,997 5-$56,533 -> (456,533)