Question
Metro Industries is considering the purchase of new equipment costing $1,040,000 to replace existing equipment that will be sold for $189,000. The new equipment is
Metro Industries is considering the purchase of new equipment costing $1,040,000 to replace existing equipment that will be sold for $189,000. The new equipment is expected to have a $239,000 salvage value at the end of its 4-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 33,400 units annually at a sales price of $28 per unit. Those units will have a variable cost of $14 per unit. The company will also incur an additional $94,000 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.)
Cash Flow Timing Amount Purchase of new equipment [Entry field with correct answer] Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 $ [Entry field with incorrect answer] Salvage of old equipment [Entry field with correct answer] Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 [Entry field with correct answer] Sales revenue [Entry field with correct answer] Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 [Entry field with correct answer] Variable costs [Entry field with correct answer] Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 [Entry field with incorrect answer] Additional fixed costs [Entry field with correct answer] Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 [Entry field with incorrect answer] Salvage of new equipment [Entry field with correct answer] Year 2 Year 4 Year 0 Year 3 Years 1-4 Year 1 [Entry field with correct answer]
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