is considering the purchase of new equipment costing $1,270,000 to replace exist

Question

is considering the purchase of new equipment costing $1,270,000 to replace existing equipment that will be sold for $175,000. The new equipment is a $206,000 salvage value at the end of its 4-year life. During the period it price of $21 per unit. Those units will have a variable cost of $15 per unit. The company will also incur an additional $80,000 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 of its use, the equipment will alow the company to produce and sell an additional 31, 100 units annually at a sales e.g. (45),) to have Salvage of old equipment Variable costs Additional fixed costs

Explanation / Answer

Identify the amount and timing of cash flow :

Amount Timing Purchase of new equipment -1270000 Year 0 Salvage of old equipment 175000 Year 0 Sales revenue 653100 Year 1-4 Variable cost -466500 Year 1-4 Additional fixed cost -80000 Year 1-4 Salvage of new equipment 206000 Year 4

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.