Vorteck inc manufactures snowsuits vorteck is considering

Reference no: EM13600050

Vorteck Inc. manufactures snowsuits. Vorteck is considering purchasing a new sewing machine at a cost of $2.5 million. Its existing machine was purchased five years ago at a price of $1.8 million six months ago; Vorteck spent $55,000 to keep it operational. The existing sewing machine can be sold today for $260,000. 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 $390,000
2 400,000
3 411,000
4 426,000
5 434,000
6 435,000
7 436,000

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 $380,000. This new equipment would require maintenance costs of $95,000 at the end of the fifth year. The cost of capital is 9%.

Use the net present value method to determine whether Vorteck should purchase the new machine to replace the exiting machine, and state the reason for your conclusion.

Reference no: EM13600050

Questions Cloud

Mares enterprises applies overhead using direct labor hours : mares enterprises applies overhead using direct labor hours. expected direct labor hours - 600000 actual direct labor

Explain the characteristics of integer programming : explain the characteristics of integer programming problems.give specific instances in which you would use an integer

A company had calculated net income to be 77550 based on : a company had calculated net income to be 77550 based on the unadjusted trial balance. the following adjusting journal

How much would the crow manufacturings total income from : assume that a transfer price of 110 has been established and that 40000 units of materials are transferred with no

Vorteck inc manufactures snowsuits vorteck is considering : vorteck inc. manufactures snowsuits. vorteck is considering purchasing a new sewing machine at a cost of 2.5 million.

Awm corp a calendar-year firm is authorized to issue : awm corp. a calendar-year firm is authorized to issue 200000 of 10 percent 20-year bonds dated jauary 1 2011 with

Lambert invests 10000 for a 13 interest in a partnership : lambert invests 10000 for a 13 interest in a partnership in which the other partners have capital totaling 26000 before

Elle inc has two types of handbags standard and custom the : elle inc. has two types of handbags standard and custom. the controller has decided to use a plant wide overhead rate

Xavier and yolanda have original investments of 50000 and : xavier and yolanda have original investments of 50000 and 100000 respectively in a partnership. the articles of

User Account

All Pages