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Flounder Industries is considering the purchase of new equipment costing $1,208,000 to replace existing equipment that will be sold for $182,600. The new equipment is
Flounder Industries is considering the purchase of new equipment costing $1,208,000 to replace existing equipment that will be sold for $182,600. The new equipment is expected to have a $220,000 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 $29 per unit. Those units will have a variable cost of $13 per unit. The company will also incur an additional $94,100 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 foctor table provided and round final answer to 0 decimal place, es. 58,971. Enter negative amounts using a negative sign preceding the number e.g. 58,971 or parentheses eg. (58,971).) Cash Flow Present Value Purchase of new equipment $ Salvage of old equipment Sales revenue Variable costs Additional fixed costs Salvage of new equipment
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