14. Red Deer Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed of now, it may be sold for $60,000. The new machine will cost $200,000 and an additional cash investment in working capital of $60,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. What is the net present value of the investment, assuming the required rate of return is 10%? Further, would the company want to purchase the new machine? A. $82,000, yes B. $50,000, no C. $(50,000), yes D. $(82,000), no E. More information is needed. 7. Division A produces a component for the Tesslo Company's Assembly Division. Both divisions operate as a profit center. Division A also sells to outsiders at a selling price of $75 per component. The Assembly Division buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A: Direct material $30 per unit Direct labor $25 per unit Variable overhead $10 per unit Fixed overhead (based on a capacity of 5,000 units) $6 per unit The price range within which Division A would sell components to Assembly is: A. $71 to $73 B. $65 to $73 C. $71 to $75 D. $65 to $75