Crane Inc manufactures snowsuits Crane is considering purchas machine was purchased 5 years ago a aprice of $1.8 million existing sewing machi Operating costs would decre $241835 the following amounts f Year 1 2 $389.500 399,400 411.000 3 4 425,400 5 433.700 435.300 417 m new sewing machine at a cost of $2.45 million its existing Crane spent $55,000 to keep it operational The would require a one-time, $85.000 training cost
Crane Inc manufactures snowsuits Crane is considering purchas machine was purchased 5 years ago a aprice of $1.8 million existing sewing machi Operating costs would decre $241835 the following amounts f Year 1 2 $389.500 399,400 411.000 3 4 425,400 5 433.700 435.300 417 m new sewing machine at a cost of $2.45 million its existing Crane spent $55,000 to keep it operational The would require a one-time, $85.000 training cost
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
domestic
Transcribed Image Text: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 $241,835. 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
2
3
4
5
6
7
$389.500
399,400
411,000
425,400
433.700
435.300
437 300
The new sewing machine would be depreciated according to the declining balance method at a rate of 20%. The sahvage value is
expected to be $379.500 This new equipment would require maintenance costs of $94.500 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 of net present value is negative then enter with negative sign preceding the
number eg-45 or parentheses ea. (45) Round present value answer to 0 decimal places, eg 125. For calculation purposes, use 5 decimal
places as displayed in the factor table provided)
Calculate the net present value
Net present value 3
Determine whether Crane should purchase the new machine to replace the existing machine!
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education