Question
Monty Industries is considering the purchase of new equipment costing $1,300,000 to replace existing equipment that will be sold for $194,000. The new equipment is
Monty Industries is considering the purchase of new equipment costing $1,300,000 to replace existing equipment that will be sold for $194,000. The new equipment is expected to have a $223,000 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 32,600 units annually at a sales price of $27 per unit. Those units will have a variable cost of $15 per unit. The company will also incur an additional $70,000 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 | Timing | Amount | ||
---|---|---|---|---|
Purchase of new equipment | Select a period of time Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 | $Enter a dollar amount Enter a dollar amount | ||
Salvage of old equipment | Select a period of time Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 | Enter a dollar amountEnter a dollar amount | ||
Sales revenue | Select a period of time Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 | Enter a dollar amountEnter a dollar amount | ||
Variable costs | Select a period of time Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 | Enter a dollar amountEnter a dollar amount | ||
Additional fixed costs | Select a period of time Year 0 Year 1 Year 2 Year 3 Year 4 Years 1-4 | Enter a dollar amountEnter a dollar amount | ||
Salvage of new equipment | Select a period of time Years 1-4 Year 3 Year 1 Year 2 Year 0 Year 4 | Enter a dollar amountEnter a dollar amount |
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