Bramble Industries is considering the purchase of new equipment costing $1,430,000 to replace existing equipment that will be sold for $157,000. The new equipment is expected to have a $203,000 salvage value at the end of its 4-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 34,800 units annually at a sales price of $30 per unit. Those units will have a variable cost of $14 per unit. The company will also incur an additional $87,000 in annual fixed costs.Identify the amount and timing of all cash flows related to the acquisition of the new equipment. (Enter negative amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cash Flow Timing Amount Purchase of new equipment Year 0Year 1Year 2Year 3Year 4Years 1-4 $ Salvage of old equipment Year 0Year 1Year 2Year 3Year 4Years 1-4 Sales revenue Year 0Year 1Year 2Year 3Year 4Years 1-4 Variable costs Year 0Year 1Year 2Year 3Year 4Years 1-4 Additional fixed costs Year 0Year 1Year 2Year 3Year 4Years 1-4 Salvage of new equipment Year 1Year 2Year 3Years 1-4Year 0Year 4
Bramble Industries is considering the purchase of new equipment costing $1,430,000 to replace existing equipment that will be sold for $157,000. The new equipment is expected to have a $203,000 salvage value at the end of its 4-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 34,800 units annually at a sales price of $30 per unit. Those units will have a variable cost of $14 per unit. The company will also incur an additional $87,000 in annual fixed costs.Identify the amount and timing of all cash flows related to the acquisition of the new equipment. (Enter negative amounts using a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cash Flow Timing Amount Purchase of new equipment Year 0Year 1Year 2Year 3Year 4Years 1-4 $ Salvage of old equipment Year 0Year 1Year 2Year 3Year 4Years 1-4 Sales revenue Year 0Year 1Year 2Year 3Year 4Years 1-4 Variable costs Year 0Year 1Year 2Year 3Year 4Years 1-4 Additional fixed costs Year 0Year 1Year 2Year 3Year 4Years 1-4 Salvage of new equipment Year 1Year 2Year 3Years 1-4Year 0Year 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bramble Industries is considering the purchase of new equipment costing $1,430,000 to replace existing equipment that will be sold for $157,000. The new equipment is expected to have a $203,000 salvage value at the end of its 4-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 34,800 units annually at a sales price of $30 per unit. Those units will have a variable cost of $14 per unit. The company will also incur an additional $87,000 in annual fixed costs.
Identify the amount and timing of all
| Cash Flow | Timing | Amount | ||
| Purchase of new equipment |
Year 0Year 1Year 2Year 3Year 4Years 1-4
|
$
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| Salvage of old equipment |
Year 0Year 1Year 2Year 3Year 4Years 1-4
|
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||
| Sales revenue |
Year 0Year 1Year 2Year 3Year 4Years 1-4
|
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||
| Variable costs |
Year 0Year 1Year 2Year 3Year 4Years 1-4
|
|
||
| Additional fixed costs |
Year 0Year 1Year 2Year 3Year 4Years 1-4
|
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| Salvage of new equipment |
Year 1Year 2Year 3Years 1-4Year 0Year 4
|
|
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