Question
Culver Industries is considering the purchase of new equipment costing $1,232,000 to replace existing equipment that will be sold for $184,500. The new equipment is
Culver Industries is considering the purchase of new equipment costing $1,232,000 to replace existing equipment that will be sold for $184,500. The new equipment is expected to have a $206,000 salvage value at the end of its 5-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 34,500 units annually at a sales price of $30 per unit. Those units will have a variable cost of $13 per unit. The company will also incur an additional $97,900 in annual fixed costs. Click here to view the factor table. Calculate the present value of each cash flow assuming an 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amounts using a negative sign preceding the number e.g. -58,971 or parentheses e.g. (58,971).)
Culver Industries is considering the purchase of new equipment costing $1,232,000 to replace existing equipment that will be sold for $184,500. The new equipment is expected to have a $206,000 salvage value at the end of its 5-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 34,500 units annually at a sales price of $30 per unit. Those units will have a variable cost of $13 per unit. The company will also incur an additional $97,900 in annual fixed costs. Click here to view the factor table. Calculate the present value of each cash flow assuming an 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, eg. 58,971. Enter negative amounts using a negative sign preceding the number e.g. -58,971 or parentheses e.g. (58,971).) Cash Flow Present Value $ - 1232000 Purchase of new equipment 184500 Salvage of old equipment 1035000 Sales revenue Variable costs -1453005 -317167 Additional fixed costs 145930 Salvage of new equipmentStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started