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This question is confusing me because i thought you had to put the purchase price which would be 178,800 and the installation which would be
This question is confusing me because i thought you had to put the purchase price which would be 178,800 and the installation which would be 3,325. Please, help!
Concord Vita produces a wide range of herbal supplements sold nationwide through independent distributors. In response to an increasing demand for its products, the company is considering the purchase of a new packaging machine to replace the seven-year- old machine currently in use. The new machine will cost $178,800, and installation will require an additional $3,325. The machine has a useful life of 10 years and is expected to have a salvage value of $3,660 at that time. The variable cost to operate the new machine is $12.10 per carton compared to the current machine's variable cost of $12.22 per carton, and Concord Vita expects to pack 260,000 cartons each year. If the new machine is purchased, Concord Vita will avoid a required $11,800 overhaul of the current machine in four years. The current machine has a market value of $13,300. Identify the amount and timing of all cash flows related to the acquisition of the new packaging machine. (Enter negative amounts using a negative sign preceding the number es. 45 or parentheses es. (45)) Timing Amount Cash Flow Purchase price Year o 178800 Installation Year o 3325 Salvage of old equipment Year o 13300 Year 10 4360 Salvage of new equipment Variable cost savings Avoided overhaul Years 1-10 y Year 4 11800 Step by Step Solution
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