Question
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 $239,855. 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 2 400,900 3 411,000 4 425,700 5 432,400 6 435,400 7 436,900 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 $380,600. This new equipment would require maintenance costs of $94,400 at the end of the fifth year. The cost of capital is 9%. Click here to view PV 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.) Calculate the net present value.
(n) Periods | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | 15% |
---|---|---|---|---|---|---|---|---|---|---|
1 | .96154 | .95238 | .94340 | .93458 | .92593 | .91743 | .90909 | .90090 | .89286 | .86957 |
2 | .92456 | .90703 | .89000 | .87344 | .85734 | .84168 | .82645 | .81162 | .79719 | .75614 |
3 | .88900 | .86384 | .83962 | .81630 | .79383 | .77218 | .75132 | .73119 | .71178 | .65752 |
4 | .85480 | .82270 | .79209 | .76290 | .73503 | .70843 | .68301 | .65873 | .63552 | .57175 |
5 | .82193 | .78353 | .74726 | .71299 | .68058 | .64993 | .62092 | .59345 | .56743 | .49718 |
6 | .79031 | .74622 | .70496 | .66634 | .63017 | .59627 | .56447 | .53464 | .50663 | .43233 |
7 | .75992 | .71068 | .66506 | .62275 | .58349 | .54703 | .51316 | .48166 | .45235 | .37594 |
8 | .73069 | .67684 | .62741 | .58201 | .54027 | .50187 | .46651 | .43393 | .40388 | .32690 |
9 | .70259 | .64461 | .59190 | .54393 | .50025 | .46043 | .42410 | .39092 | .36061 | .28426 |
10 | .67556 | .61391 | .55839 | .50835 | .46319 | .42241 | .38554 | .35218 | .32197 | .24719 |
11 | .64958 | .58468 | .52679 | .47509 | .42888 | .38753 | .35049 | .31728 | .28748 | .21494 |
12 | .62460 | .55684 | .49697 | .44401 | .39711 | .35554 | .31863 | .28584 | .25668 | .18691 |
13 | .60057 | .53032 | .46884 | .41496 | .36770 | .32618 | .28966 | .25751 | .22917 | .16253 |
14 | .57748 | .50507 | .44230 | .38782 | .34046 | .29925 | .26333 | .23199 | .20462 | .14133 |
15 | .55526 | .48102 | .41727 | .36245 | .31524 | .27454 | .23939 | .20900 | .18270 | .12289 |
16 | .53391 | .45811 | .39365 | .33873 | .29189 | .25187 | .21763 | .18829 | .16312 | .10687 |
17 | .51337 | .43630 | .37136 | .31657 | .27027 | .23107 | .19785 | .16963 | .14564 | .09293 |
18 | .49363 | .41552 | .35034 | .29586 | .25025 | .21199 | .17986 | .15282 | .13004 | .08081 |
19 | .47464 | .39573 | .33051 | .27615 | .23171 | .19449 | .16351 | .13768 | .11611 | .07027 |
20 | .45639 | .37689 | .31180 | .25842 | .21455 | .17843 | .14864 | .12403 | .10367 | .06110 |
(n) Payments | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | 15% |
---|---|---|---|---|---|---|---|---|---|---|
1 | .96154 | .95238 | .94340 | .93458 | .92593 | .91743 | .90909 | .90090 | .89286 | .86957 |
2 | 1.88609 | 1.85941 | 1.83339 | 1.80802 | 1.78326 | 1.75911 | 1.73554 | 1.71252 | 1.69005 | 1.62571 |
3 | 2.77509 | 2.72325 | 2.67301 | 2.62432 | 2.57710 | 2.53130 | 2.48685 | 2.44371 | 2.40183 | 2.28323 |
4 | 3.62990 | 3.54595 | 3.46511 | 3.38721 | 3.31213 | 3.23972 | 3.16986 | 3.10245 | 3.03735 | 2.85498 |
5 | 4.45182 | 4.32948 | 4.21236 | 4.10020 | 3.99271 | 3.88965 | 3.79079 | 3.69590 | 3.60478 | 3.35216 |
6 | 5.24214 | 5.07569 | 4.91732 | 4.76654 | 4.62288 | 4.48592 | 4.35526 | 4.23054 | 4.11141 | 3.78448 |
7 | 6.00205 | 5.78637 | 5.58238 | 5.38929 | 5.20637 | 5.03295 | 4.86842 | 4.71220 | 4.56376 | 4.16042 |
8 | 6.73274 | 6.46321 | 6.20979 | 5.97130 | 5.74664 | 5.53482 | 5.33493 | 5.14612 | 4.96764 | 4.48732 |
9 | 7.43533 | 7.10782 | 6.80169 | 6.51523 | 6.24689 | 5.99525 | 5.75902 | 5.53705 | 5.32825 | 4.77158 |
10 | 8.11090 | 7.72173 | 7.36009 | 7.02358 | 6.71008 | 6.41766 | 6.14457 | 5.88923 | 5.65022 | 5.01877 |
11 | 8.76048 | 8.30641 | 7.88687 | 7.49867 | 7.13896 | 6.80519 | 6.49506 | 6.20652 | 5.93770 | 5.23371 |
12 | 9.38507 | 8.86325 | 8.38384 | 7.94269 | 7.53608 | 7.16073 | 6.81369 | 6.49236 | 6.19437 | 5.42062 |
13 | 9.98565 | 9.39357 | 8.85268 | 8.35765 | 7.90378 | 7.48690 | 7.10336 | 6.74987 | 6.42355 | 5.58315 |
14 | 10.56312 | 9.89864 | 9.29498 | 8.74547 | 8.24424 | 7.78615 | 7.36669 | 6.98187 | 6.62817 | 5.72448 |
15 | 11.11839 | 10.37966 | 9.71225 | 9.10791 | 8.55948 | 8.06069 | 7.60608 | 7.19087 | 6.81086 | 5.84737 |
16 | 11.65230 | 10.83777 | 10.10590 | 9.44665 | 8.85137 | 8.31256 | 7.82371 | 7.37916 | 6.97399 | 5.95424 |
17 | 12.16567 | 11.27407 | 10.47726 | 9.76322 | 9.12164 | 8.54363 | 8.02155 | 7.54879 | 7.11963 | 6.04716 |
18 | 12.65930 | 11.68959 | 10.82760 | 10.05909 | 9.37189 | 8.75563 | 8.20141 | 7.70162 | 7.24967 | 6.12797 |
19 | 13.13394 | 12.08532 | 11.15812 | 10.33560 | 9.60360 | 8.95012 | 8.36492 | 7.83929 | 7.36578 | 6.19823 |
20 | 13.59033 | 12.46221 | 11.46992 | 10.59401 | 9.81815 | 9.12855 | 8.51356 | 7.96333 | 7.46944 | 6.25933 |
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