Question
View Policies Current Attempt in Progress Crane Inc. manufactures snowsuits. Crane is considering purchasing a new sewing machine at a cost of $2.45 million.
View Policies Current Attempt in Progress Crane Inc. manufactures snowsuits. Crane 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, Crane spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,845. 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 $391,000 2 399,100 3 411,000 4 426,000 5 433,200 6 435,300 7 436,500 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 $379,800. This new equipment would require maintenance costs of $94,900 at the end of the fifth year. The cost of capital is 9%. Click here to view the factor 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 e.g.-45 or parentheses e.g. (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value. Net present value $ Determine whether Crane should purchase the new machine to replace the existing machine? eTextbook and Media Save for Later Using multiple attempts will impact your score. 10% score reduction after attempt 2 Attempts: 0 of 3 used Submit Answer
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