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 $389,500 2 399,400 3 411,000 4 425,400 5 433,700 6 435,300 7 437,300 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 $379,500. 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: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal
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 $389,500 2 399,400 3 411,000 4 425,400 5 433,700 6 435,300 7 437,300 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 $379,500. 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: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
Related questions
Question
am. 121.
![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
$389,500
2
399,400
3
411,000
4
425,400
5
433,700
6
435,300
7
437,300
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 $379,500. 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: (If net present value is negative then enter with negative sign preceding the
number e.g. -45 or parentheses e.g. (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e005091-6650-4849-8cc2-33b0fb013641%2F65c0dbcc-56ba-4de0-a141-ab5f207b3452%2Fsdbx0e_processed.png&w=3840&q=75)
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
$389,500
2
399,400
3
411,000
4
425,400
5
433,700
6
435,300
7
437,300
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 $379,500. 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: (If net present value is negative then enter with negative sign preceding the
number e.g. -45 or parentheses e.g. (45). Round present value answer to O decimal places, e.g. 125. For calculation purposes, use 5 decimal
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Excel Applications for Accounting Principles](https://www.bartleby.com/isbn_cover_images/9781111581565/9781111581565_smallCoverImage.gif)
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Excel Applications for Accounting Principles](https://www.bartleby.com/isbn_cover_images/9781111581565/9781111581565_smallCoverImage.gif)
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning