Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $246,049. 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 2 3 4 5 6 7 $389,200 399,800 410,200 425,900 432,400 435,200 436,800 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 $379,300. This new equipment would require maintenance costs of $99,000 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $

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Chapter1: Financial Statements And Business Decisions
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Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing
machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The
existing sewing machine can be sold today for $246,049. 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
2
3
5
СЛ
6
7
$389,200
399,800
410,200
425,900
432,400
435,200
436,800
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 $379,300. This new equipment would require maintenance costs of $99,000 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
places as displayed in the factor table provided.)
Calculate the net present value.
Net present value $
Transcribed Image Text:Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $246,049. 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 2 3 5 СЛ 6 7 $389,200 399,800 410,200 425,900 432,400 435,200 436,800 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 $379,300. This new equipment would require maintenance costs of $99,000 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 places as displayed in the factor table provided.) Calculate the net present value. Net present value $
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