Question
Novak Industries is considering the purchase of new equipment costing $1,242,000 to replace existing equipment that will be sold for $180,300. The new equipment is
Novak Industries is considering the purchase of new equipment costing $1,242,000 to replace existing equipment that will be sold for $180,300. The new equipment is expected to have a $218,000 salvage value at the end of its 8-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 31,500 units annually at a sales price of $26 per unit. Those units will have a variable cost of $14 per unit. The company will also incur an additional $94,700 in annual fixed costs. Click here to view the factor table. Calculate the present value of each cash flow assuming an 10% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amounts using a negative sign preceding the number e.g. -58,971 or parentheses e.g. (58,971).)
Cash Flow Present Value Purchase of new equipment $ Salvage of old equipment Sales revenue Variable costs Additional fixed costs Salvage of new equipmentStep by Step Solution
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