Exercise 25-03 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 $241,115. 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 $389,000 400,400 411,000 425,700 433,800 435,200 437,500 5 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 $95,300 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.o. (45). Round present value answer to 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 TABLE 1 Future Value of 1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 100000 129 1.00000 15% 0000 0 1.00000 1.00000 1.00000 1.00000 1.00000 0 1.00000 1.10000 1.05000 1.06000 1.07000 1.08000 1.09000 1.11000 1 2 1 1 1.12360 1.14490 1.16640 1.21000 1.23210 1.12000 1.25440 1.40493 1.10250 1.15763 1.21551 1.15000 1.32250 1.52088 1.19102 1.22504 1.25971 1.33100 3 4 1.36763 1.26248 1.31080 1.36049 1.18810 1.29503 1.41158 1.53862 1.67710 1.46410 1.51807 1.57352 1.74901 5 1 1.27628 1.33823 1.61051 1.00000 .04000 .08160 1.12486 1.16986 .21665 1.26532 1.31593 1.36857 1.42331 1.48024 .53945 1.68506 1.40255 1.50073 1.46933 1.58687 1.76234 1.97382 2.01136 2.31306 6 1.34010 1.41852 1.77156 1.87041 1.40710 1.50363 1.60578 1.82804 1.94872 2.07616 2.21068 2.66002 1.71382 1.85093 1.47746 1.59385 1.71819 2.30454 2.47596 1.99256 2.17189 2.14359 2.35795 3.05902 3.51788 1.68948 1.83846 1.99900 2.55803 2.77308 1.55133 1.62889 1.71034 1.79085 1.96715 2.15892 10 11 2.83942 2.36736 2.58043 2.59374 2.85312 3.10585 3.47855 4.04556 4.65239 1 1.89830 2.10485 2.33164 3.15176 TABLE 2 Future Value of an Annuity of 1 Payments 5% 6% 7% 8% 9% 10% 11% 1.00000 1.0000 1.00000 1.00000 1.00000 2.04000 15% 1.00000 2.15000 3.47250 2 2.06000 2.0700 2.08000 2.11000 3.34210 12% 1.00000 2.12000 3.37440 4.77933 3.12160 3.18360 3.2149 3.24640 4.24646 4.37462 4.4399 4.50611 1.00000 2.09000 3.27810 4.57313 5.98471 7.52334 9.20044 1.00000 2.10000 3.31000 4.64100 6.10510 7.71561 9.48717 4.70973 4.99338 5.41632 5.63709 5.7507 6.22780 6.35285 1.00000 2.05000 3.15250 4.31013 5.52563 6.80191 8.14201 9.54911 11.02656 12.57789 14.20679 6.74238 5.86660 7.33592 6.63298 6.97532 7.91286 8.11519 8.75374 7.1533 8.6540 7 7.89829 8.39384 8.92280 10.08901 11.06680 13.72682 9.21423 9.89747 11.49132 10.2598 11.9780 10.63663 12.48756 14.48656 11.43589 13.57948 10.58280 12.00611 11.02847 13.02104 15.19293 17.56029 9.78327 11.85943 14.16397 16.72201 19.56143 12.29969 14.77566 17.54874 2065458 10 13.8164 13.18079 14.97164 15.93743 18.53117 16.78584 20.30372 24.34928 13.48635 15.7836 16.64549 | 14.97164 | 14.20679 1591713 12 16.865094 | 13.48635 | 15.02581 16.62684 18 29191 | 19.56143 22.71319 26.21164 30.09492 15.7836 17.8885 20.1406 22.505 | 25.1231 | 17.71298 24.3.4928 | 29.00167 34.35 192 40.50471 | 18.88214 19.59863 20165458 24.13313 28.02911 32.39260 37.27972 | 42.75328 21.01507 23.27597 47.58CNML 21.57856 23.65749 16.64549 18.97713 21.49530 24.21492 27.15211 30.32428 33.75023 37 45024 41 4626 45.76196 17.56029 2 0.14072 22.95339 2 6.01919 2 9.36092 3 3.03.40 36.97351 41.2014 46.01846 5 L 16012 18.53117 | 21.38428 24.52271 27.97498 3 1.77248 35.4973 4 0.5470 45.5917 51.1509 57.27500 16 34.40536 39.18995 25.67253 27.88] 55.71 747 4 20.02359 21.82453 23.69751 25.64541 2767123 29.77808 8.88367 65.0750W) 17 18 19 20 28.21288 30.90565 25.84037 28.13238 | 053900 | 33.06595 30.8402 33.90 37.3700 40.2955 44.50084 5 0.39593 5 693949 64.20283 33.75999 36.78559 55.74972 63.43968 72.05244 75.83636 88.21181 | 102.44358 TABLE 3 Present Value of 1 Periods 5% 69 75 8% 9% 11% 12% 15% 10% 90909 94340 93458 92593 91743 90090 89286 .86957 4% 96154 92456 .88900 95238 90703 2 89000 .87344 .85734 84168 .82645 .81162 79719 75614 .86384 .83962 .81630 .79383 .77218 .75132 .73119 71178 .65752 .85480 .79209 .76290 .73503 70843 .68301 .65873 .63552 57175 .82270 78353 .82193 .74726 .71299 .68058 .64993 .62092 59345 .56743 .49718 79031 .74622 .70496 .66634 .63017 .59627 .56447 53464 50663 43233 .75992 71068 .66506 .62275 58349 .54703 51316 .48166 45235 37594 .73069 .67684 .62741 .58201 .54027 .46651 43393 40388 32690 .50187 46043 70259 .64461 59190 .54393 50025 42410 39092 36061 28426 10 55839 .50835 46319 32197 24719 .67556 .64958 .61391 58468 42241 38753 38554 .35049 .35218 .31728 52679 47509 .42888 28748 -21494 1.52679 47509 142888 35049 31728 228748 .64958 162460) 38753 35554 19477 4440L 39711 31863 128584 1.58468 155684 53032 1.500507 48 102 25668 .22917 MIUID57 1.46884 30770 32618 2896 41496 38782 225751 1231995 1.21494 | 18649] | 16253 1.14133 | 12289 | 10687 57748 44230 34046 26333 123939 .20462 1.18270 41727 136245 16 155526 53391 151337 45811 139365 121763 129925 27454 12.5 187 23107 1.21199 1.3.3873 31657 .20900) | 18829 | 199633 1.16312 436:30 137136 | 14564 31524 29189 270027 25025 123171 21455 09293 | 19785 17086 449363 41552 1.35034 29586 1 5282 130M14 108081 | 107027 47464 139573 4563937689 33051 3118 27615 25842 19449 | 17843 .1635] 1.14864 | 13768 ,12403 11611 10367 10610 | 16 11.652.30 | 10.8377 10.105490) 9.44665 8.85137 8 31255 6 5.95424 .97399 | 7.11963 10.47726 1976.322 9.12164 8.54363 7.82371 8.02155 8.20141 12.16567 12.65930 6.04716 | 11.27407 | 11.68959 10.827) 9.37189 8.75563 | 7.37916 | 7.5.4879 7.7062 17.83929 | 7.96.33 6.12 ] 13.13394 |1.15812 | 10.05979 | 10.356) | 10.59401 | 9.60360 | 12.08532 | 12.46221 8.95012 8.36492 8.51356 | 724967 | 7.36578 7.46944 6.19823 6.25933 13.59033 | 11.46992 | 9.81815 9 .12855