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Current Attempt in Progress Pharoah Inc. manufactures snowsuits. Pharoah 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, Pharoah spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,275. 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 $390,600 400,200 3 410,000 4 425,200 5 432,400 6 435,500 7 436,300 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 $380,500. This new equipment would require maintenance costs of $94,900 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 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $

Current Attempt in Progress Pharoah Inc. manufactures snowsuits. Pharoah 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, Pharoah spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,275. 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 $390,600 400,200 3 410,000 4 425,200 5 432,400 6 435,500 7 436,300 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 $380,500. This new equipment would require maintenance costs of $94,900 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 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Current Attempt in Progress Pharoah Inc. manufactures snowsuits. Pharoah 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, Pharoah spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,275. 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 $390,600 400,200 3 410,000 4 425,200 5 432,400 6 435,500 7 436,300 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 $380,500. This new equipment would require maintenance costs of $94,900 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 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $
Transcribed Image Text:Current Attempt in Progress Pharoah Inc. manufactures snowsuits. Pharoah 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, Pharoah spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,275. 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 $390,600 400,200 3 410,000 4 425,200 5 432,400 6 435,500 7 436,300 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 $380,500. This new equipment would require maintenance costs of $94,900 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 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $
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