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Exercise 25-03 Hillsong Inc, manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its exis machine was purchased
Exercise 25-03 Hillsong Inc, manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its exis machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. Th existing sewing machine can be sold today for $245,090. The new sewing machine would require a one-time, $85,000 training cos 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 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 $ Determine whether Hillsong should purchase the new machine to replace the existing machine? Click if you would like to Show Work for this question: Open Show Work
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