Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 22 0/6.25 pts Information for Questions 16-23: Carla's Citrus packs and ships high-quality oranges, grapefruit, and other fruit to retailers in the U.S. Carla
Question 22 0/6.25 pts Information for Questions 16-23: Carla's Citrus packs and ships high-quality oranges, grapefruit, and other fruit to retailers in the U.S. Carla has been experiencing an increase in demand for its products and is considering the purchase of a new packaging machine to replace the machine currently in use. The new machine will cost $202,500, and installation will require an additional $4,050. The machine has a useful life of 10 years and is expected to have a salvage value of $5,400 at the end of its useful life. The variable cost to operate the new machine is $13.50 per carton compared to the current machine's variable cost of $13.65 per carton. Carla expects to pack 250,000 cartons each year. If the new machine is purchased, Carla will avoid a required $13,500 overhaul of the current machine three years. The current machine has a market value of $16,200 and will be disposed of. Carlo uses a 10% discount rate. What is the Profitability Index of the investment? 0.68
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