Exercise 9-1 Marigold Industries is considering the purchase of new equipment co

Question

Exercise 9-1 Marigold Industries is considering the purchase of new equipment costing $1,070,000 to replace existing equipment that will be sold for $200,000. The new equipment is expected to have a $219,000 salvage value at the end of its 4-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 31,600 units annually at a sales price of $23 per unit. Those units will have a variable cost of $12 per unit. The company will also incur an additional $81,000 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 parentheses e.g. (45).) Cash Flow Timing Amount Purchase of new equipment Salvage of old equipment Sales revenue Variable costs Additional fixed costs Salvage of new equipment Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Solution:

Cash flow Timing Amount Purchase of new equipment Year-0 -1,070,000 Salvage of old equipment Year-0 200,000 Sales revenue (31,600*23) Year 1-4 726,800 Variable costs (31,600 * 12) Year 1-4 -379,200 Additional fixed costs Year 1-4 -81,000 Salvage of new equipment Year -4 219,000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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