Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

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 $245,090. 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 $389,800 2 399,800 3 410,200 4 425,400 5 432,400 6 435,000 436,000 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 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Robert Libby, Patricia Libby, Frank Hodge

9th edition

290-1259222138, 1259222136, 978-1259222139

More Books

Students also viewed these Accounting questions

Question

What is master production scheduling and how is it done?

Answered: 1 week ago

Question

What is the scope of the project?

Answered: 1 week ago

Question

Which threats and opportunities can already be identified today?

Answered: 1 week ago

Question

Who are the decision-makers in this project?

Answered: 1 week ago