Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2000 for $200,000. It's now January 1, 2020, and the manager of the Model Ships Division, Jeri Finley, is considering two alternatives. The following are last year's average per-unit manufacturing costs, when production was 8,600 ships: Direct materials Direct labor Variable overhead Fixed overhead The equipment will last for five more years with zero disposal value at that time. It can be sold immediately for $35,000. The cost of the new equipment is $205,000 and will have a ve-year useful life with an estimated disposal value at that time of $40,000. The sales representative selling the new equipment stated, "The new equipment will allow direct labor and variable overhead to be reduced by a total of $2.25 per unit." Finley thinks this estimate is accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.19 more per unit. Fixed overhead costs will not change. Finley expects production to continue at 0,600 ships in each of the next ve years. REQUIRED [USE THE PRESENT VALUE TABLES 0N PAGE 113 TO COMPUTE NEI' PRESENT VALUES; BE SURE TO USE THE NEGATIVE SIGN WHEN SUBMITTING NEGATIVE NET PRESENT VALUES; DO NOT INCLUDE A DOLLAR SIGN] 1 Assuming a discount rate of 5%, what is the net present value if Nautical Creations uses their current tools to produce the part? : Tries 0/5 2 Assuming a discount rate of 5%, what is the net present value if Nautical Creations buys the new tools to produce the part? |: Tries 0/5