Bridgeport Industries is considering the purchase of new equipment costing $1,24

Question

Bridgeport Industries is considering the purchase of new equipment costing $1,243,000 to replace existing equipment that will be sold for $188,300. The new equipment is expected to have a $210,000 salvage value at the end of its 6-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 38,900 units annually at a sales price of $27 per unit. Those units will have a variable cost of $15 per unit. The company will also incur an additional $91,900 in annual fixed costs. Click here to view the factor table Calculate the present value of each cash flow assuming an 9% discount rate. For calculation purposes, se 4 dec na places as displayed in the facto able provided and round final answer to O decimal place, e.g. 58,971. Enter negative amounts using a negative sign preceding the number e.g.-58,971 or parentheses e.g.(58,971).) Cash Flow Present Value 1,243,000 Purchase of new equipment $ Salvage of old equipment 188,300 4,574,330 Sales revenue 2,541,143 Variable costs 400,225 Additional fixed costs 118,440 Salvage of new equipment

Explanation / Answer

Purchase of new equipment = 1243000 - 188300 = 1054700

Salvage value of old equipment = 188300

Sales revenue = 38900*27 = 1050300

Variable cost = 38900*15 = 583500

Additional fixed costs = 91900

Salvage value of new equipment = 210000

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