Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please help Difend Cleaners has been considering the purchase of an industrial dry - cleaning machine. The existing machine is operable for three more years
please help
Difend Cleaners has been considering the purchase of an industrial dry - cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed now, it may be soid for $130,000. The new machine will cost $430,000 and an additional cash investment in working capital of $170,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $120,000 in additional cash inflows during the first year of acquisition and $340,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. What is the net present value of the investment, assuming the required rate of retum is 7% ? Would the company want to purchase the new machine? A. $($216,460), no B. $216,460, yes C. $277,541; yes D. $($277,541); no Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started