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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
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 $242,097. 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 $389,200 2 400.900 3 410.900 4 425,200 5 432,600 6 435,300 7 436.500 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 $380,900. This new equipment would require maintenance costs of $97,800 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 eg. - 45 or parentheses e.g. (45). Round present value answer to decimal places, eg. 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? Save for Later Attempts: 0 of 7 used Submit
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