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OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French.
OPTION 1: PURCHASE A NEW CNC MACHINE WITH CASH Although it would be costly, the idea of adding a third CNC machine appealed to French. It would provide him peace of mind that if there were a breakdown, jobs would continue on schedule. French's preliminary research revealed that the cost of the new equipment would be $142,000. He also estimated that there would be increased out-of-pocket operating costs of $10,000 per month if a new machine were brought online. After five years, the machine would have a salvage value of $40,000. Although Peregrine did not have the cash readily available to make the purchase, French believed that with a small amount of cash budgeting and planning, this option would be feasible. Using the data provided in the Case Study, enter into the yellow, bordered cells Option 1: Purchase the CNC Machine with Cash Year o Year 1 Year 2 Year 3 Year 4 Year 5 $ $ $ $ $ Inflows Gross Revenue Salvage value Total Inflows 40,000 0 0 0 40,000 Outflows Initial purchase/Cash Outlay Cost of Goods Sold Operating costs Total Outflows *Outflows are entered as a negative number 0 0 0 0 0 0 0 0 0 0 0 Overall Cashflow $ $ $ $ 40,000 Net Present Value: $ 40,000
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