Culver Industries is considering the purchase of new equipment costing $732,000 to replace existing equipment that will be sold for $109,800. The new equipment is expected to have a $122,000 salvage value at the end of its 2-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 18,300 units annually at a sales price of $12 per unit. Those units will have a variable cost of $7 per unit. The company will also incur an additional $54,900 in annual fixed costs.Click here to view the factor table.(a) Calculate the net present value of the proposed equipment purchase. Assume that Culver uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amount using a negative sign preceding the number e.g. -59,992 or parentheses e.g. (59,992).) Net present value $ (b) Do you recommend that Culver Industries invest in the new equipment? NoYes
Culver Industries is considering the purchase of new equipment costing $732,000 to replace existing equipment that will be sold for $109,800. The new equipment is expected to have a $122,000 salvage value at the end of its 2-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 18,300 units annually at a sales price of $12 per unit. Those units will have a variable cost of $7 per unit. The company will also incur an additional $54,900 in annual fixed costs.
Click here to view the factor table.
(a) Calculate the
| Net present value | $
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(b) Do you recommend that Culver Industries invest in the new equipment?
|
NoYes
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