Sunland Inc. manufactures snowsuits. Sunland 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, Sunland spent $55,000 to keep it operational. The existing sewing machine can be sold today for $244,395. 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 5 6 7 $389,500 400,400 410,500 425,400 433,000 435,400 436,600 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 $379.200. This new equipment would require maintenance costs of $98.000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV 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 eg.-45 or parentheses eg. (45). Round present value answer to O decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value.

Sunland Inc. manufactures snowsuits. Sunland 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, Sunland spent $55,000 to keep it operational. The existing sewing machine can be sold today for $244,395. 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 5 6 7 $389,500 400,400 410,500 425,400 433,000 435,400 436,600 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 $379.200. This new equipment would require maintenance costs of $98.000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV 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 eg.-45 or parentheses eg. (45). Round present value answer to O decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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