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Question 2 of 8 0/2 E Wildhorse Inc. manufactures snowsuits. Wildhorse is considering purchasing a new sewing machine at a cost of $2.45 million.

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Question 2 of 8 0/2 E Wildhorse Inc. manufactures snowsuits. Wildhorse is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Wildhorse spent $55,000 to keep it operational. The existing sewing machine can be sold today for $245,090. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $389,800 2 399,800. 3 410,200 4 425,400 5 432,400 6 435,000 7 436,000 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,800. This new equipment would require maintenance costs of $99,000 at the end of the fifth year. The cost of capital is 9% Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number eg-45 or parentheses eg. (45), Round present value answer to O decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Calculate the net present value. Net present value $ 54800 Determine whether Wildhorse should purchase the new machine to replace the existing machine?

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