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 $153,800, and installation will require an additional $2,800. The machine has a useful life of 10 years and is expected to have a salvage value of $4,360 at that time. The variable cost to operate the new machine is $9.10 per carton compared to the current machine's variable cost of $9.20 per carton, and Concord Vita expects to pack 239,000 cartons each year. If the new machine is purchased, Concord Vita will avoid a required $9,300 overhaul of the current machine in four years. The current machine has a market value of $11,800. Click here to view the factor table. (a) Calculate the net present value of the new packaging machine. Assume that Concord Vita uses an 10% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 2 decimal places, eg. 58,971.75. Enter negative amount using a negative sign preceding the number, e.g.-59,991 or parentheses eg. (59,991)) Net present value (b) Do you recommend that Concord Vita purchase the new machine?
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 $153,800, and installation will require an additional $2,800. The machine has a useful life of 10 years and is expected to have a salvage value of $4,360 at that time. The variable cost to operate the new machine is $9.10 per carton compared to the current machine's variable cost of $9.20 per carton, and Concord Vita expects to pack 239,000 cartons each year. If the new machine is purchased, Concord Vita will avoid a required $9,300 overhaul of the current machine in four years. The current machine has a market value of $11,800. Click here to view the factor table. (a) Calculate the net present value of the new packaging machine. Assume that Concord Vita uses an 10% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 2 decimal places, eg. 58,971.75. Enter negative amount using a negative sign preceding the number, e.g.-59,991 or parentheses eg. (59,991)) Net present value (b) Do you recommend that Concord Vita purchase the new machine?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $153,800, and installation will require an additional $2,800. The machine has
a useful life of 10 years and is expected to have a salvage value of $4,360 at that time. The variable cost to operate the new machine is
$9.10 per carton compared to the current machine's variable cost of $9.20 per carton, and Concord Vita expects to pack 239,000
cartons each year. If the new machine is purchased, Concord Vita will avoid a required $9,300 overhaul of the current machine in four
years. The current machine has a market value of $11,800.
Click here to view the factor table.
(a) Calculate the net present value of the new packaging machine. Assume that Concord Vita uses an 10% discount rate. (For calculation
purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 2 decimal places, e.g. 58,971.75. Enter
negative amount using a negative sign preceding the number, e.g. -59,991 or parentheses eg. (59,991))
Net present value $
(b) Do you recommend that Concord Vita purchase the new machine?
Transcribed Image Text:(b) Do you recommend that Concord Vita purchase the new machine?
Yeş
No
(c) Assume that Concord Vita has adopted a new 13% discount rate. Calculate the net present value of the new packaging machine.
(For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 2 decimal places, e.g.
58,971.75. Enter negative amount using a negative sign preceding the number, e.g. -59,991 or parentheses eg. (59,991).)
Net present value $
Do you recommend that Concord Vita purchase the new machine?
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