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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
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 2018 for $200,000. It's now January 1, 2020, and the manager of the Model Ships Division Seri Finley, is considering two alternatives Alternative - Produce the complex part in the current couloment. The following are last year's average per-unt manufacturing costs, when production was 7,400 shos: $3.60 3.60 Direct materials Director Variable overhead Mixed overhead 1.65 4.25 The equipment will last for five more years with zero disposal value at that time. It can be sold immediately for $35,000 Alternative Produce the come exact with w..mare.siciant caulement The cost of the new equipment is $205,000 and will have a five-year useful life with an estimated disposal value at that time of 535,000. 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 think this estimate accurate, but also know that a higher quality of direct material will be necessary with the new equiomert, costing $0.19 more per unit. In addition, fixed overhead costs will increme by $2,000 Finley expects production to continue t 7,400 shios in each of the next five years. REQUIRED (USE THE PRESENT VALUE TABLES ON PAGE 13 TO COMPUTE NET PRESENT VALUES; DE SURE TO USE THE NEGATIVE SIGN WHEN SUBMITTING NEGATIVE NET PRESENT VALVES; DO NOT INCWDE A DOLLAR SIGN 1. Assuming a discount rate of 5%, what is the net present value of Nautical Creations uses their current equipment to produce the part? Submit Answer Tries 0/5 2. Assuming a discount rate of 5%, what is the net present value of Nautical Creations buys the new equipment to produce the part? Subint Answer Tries 0/5
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