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Martinez Industries is considering the purchase of new equipment costing $1,080,000 to replace existing equipment that will be sold for $161,000. The new equipment is
Martinez Industries is considering the purchase of new equipment costing $1,080,000 to replace existing equipment that will be sold for $161,000. The new equipment is expected to have a $211,000 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 32, 100 units annually at a sales price of $28 per unit. Those units will have a variable cost of $12 per unit. The company will also incur an additional $87,000 in annual fixed costs. Identify the amount and timing of all cash flows related to the acquisition of the new equipment. (Enter negative amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cash Flow Purchase of new equipment Salvage of old equipment Timing Amount $ Sales revenue Variable costs Additional fixed costs Salvage of new equipment
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