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Exercise 9-2 Your answer is partially correct. Try again Novak Vita produces a wide range of herbal supplements sold nationwide through independent distributors. In response
Exercise 9-2 Your answer is partially correct. Try again Novak Vita produces a wide range of herbal supplements sold nationwide through independent distributors. In response to an increasing demand for its products, the company is considering the purchase of a new packaging machine to replace the seven-year-old machine currently in use. The new machine will cost $163,800, and installation will require an additional $3,025. The machine has a useful life of 10 years and is expected to have a salvage value of $4,080 at that time. The variable cost to operate the new machine is $10.30 per carton compared to the current machine's variable cost of $10.38 per carton, and Novak Vita expects to pack 247,000 cartons each year. If the new machine is purchased, Novak Vita will avoid a required $10,300 overhaul of the current machine in four years. The current machine has a market value of $12,400 Identify the amount and timing of all cash flows related to the acquisition of the new packaging machine. (Enter negative amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cash Flow Timing Amount Purchase price Year 0 Installation Year 1 Salvage of old equipment Year 2 Salvage of new equipment Year 3 Variable cost savings Year 4 Avoided overhaul Year 5
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