Swifty Industries is considering the purchase of new equipment costing $432,000 to replace existing equipment that will be sold for $64,800. The new equipment is expected to have a $72,000 salvage value at the end of its 1-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 10,800 units annually at a sales price of $7 per unit. Those units will have a variable cost of $4 per unit. The company will also incur an additional $32,400 in annual fixed costs.Click here to view the factor table.(a) Calculate the net present value of the proposed equipment purchase. Assume that Swifty uses a 4% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amount using a negative sign preceding the number e.g. -59,992 or parentheses e.g. (59,992).) Net present value   $   (b) Do you recommend that Swifty Industries invest in the new equipment?  NoYes     Click if you would like to Show Work for this question: Open Show Work

Question
Swifty Industries is considering the purchase of new equipment costing $432,000 to replace existing equipment that will be sold for $64,800. The new equipment is expected to have a $72,000 salvage value at the end of its 1-year life. During the period of its use, the equipment will allow the company to produce and sell an additional 10,800 units annually at a sales price of $7 per unit. Those units will have a variable cost of $4 per unit. The company will also incur an additional $32,400 in annual fixed costs.

Click here to view the factor table.

(a) Calculate the net present value of the proposed equipment purchase. Assume that Swifty uses a 4% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971. Enter negative amount using a negative sign preceding the number e.g. -59,992 or parentheses e.g. (59,992).)

Net present value   $
 


(b) Do you recommend that Swifty Industries invest in the new equipment?

 NoYes
 

 

Click if you would like to Show Work for this question:
Open Show Work

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Other

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Activity Levels and Cost Drivers Shroeder Machine Shop has the following activities:   Machine oper...

A: Unit level activities means the activities required to be performed each time the product is manufac...

Q: The net income of F.F.  Inc., amounted to $1,920.000 for the current year. a. Compute the amount of ...

A: Note: Given net income is “$1,920.000” but it is considered as “$1,920,000”. The reason is, if the n...

Q: I need help with the two I got wrong which are highlighted in red.

A: Vertical analysis is generally done to express the relative sizes of the different accounts reported...

Q: Other accrued liabilities—warranties The balance of the Estimated Warranty Liability account was $25...

A: Calculate the amount of warranty expense for the year ended December 31, 2016.

Q: Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year ...

A: Calculate the sales price per unit.

Q: How is income defined by the IRC? For example, suppose you decided to hold a garage sale one fine su...

A: IRC or the Internal Revenue Code is a statutory tax law in the united states for domestic income. Th...

Q: Work-in-Process Inventory, November 1 45,000 units Work-in-Process Inventory, November 30 23...

A: Units completed and transferred inventory:Units completed and transferred inventory represents the n...

Q: Betty Boop started a small toy factory, Boopy Doop, Inc., in her garage and incorporated it in March...

A: Depreciation: Depreciation is an amount of reduction in the worth of a fixed asset during its useful...

Q: Exercise 14-16 On January 1, 2017, Novak Company makes the two following acquisitions. 1. Purchases ...

A: a. (1) Prepare journal entry to record the purchase of land:

Q: Bob and Ted are partners. Bob is a 70% partner and Ted is a 30% partner. They have decided to liquid...

A: Partnership: This is the form of business entity which is formed by an agreement, owned and managed ...

Q: Serial Problem Business Solutions LO P1, P2 Santana Rey is considering the purchase of equipment fo...

A: Payback Period: The payback period is a capital budgeting method which determines the time period re...

Q: I need help solving this, thanks!

A: Break-even sales: Break-even sales is that level of sales at which there is no profit or no loss on ...

Q: Hello, Following is a partially completed performance report for a recent week for direct labor in t...

A: Calculate the standard direct labor hours.

Q: Brief Exercise 13-13Larkspur Factory provides a 2-year warranty with one of its products which was f...

A: Prepare the journal entries to record the transactions during 2017: 

Q: Problem 12-2Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that pre...

A: The balance on the given dates can be calculated as follows :

Q: On January 1, 2019, Lin plc issued a convertible bond with a par value of £50,000 inthe market for £...

A: Given :Par value of the Bond - € 50,000Interest rate                 - 10%Issued price              ...

Q: HM company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The followin...

A: (1) Journal entries for the given transactions are as follows:  

Q: Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing p...

A: The decision to manufacture or buy needs to be taken on the basis of impact of cost changes arising ...

Q: GPC, Inc has a $150,000 mortgage liability. The mortgage is payable in monthly instatement of $1,543...

A: Step 1:Given:Mortgage Liability = $ 150,000Monthly Instalment = $1,543Interest Rate           = 12% ...

Q: Ivanhoe Co. sells $396,000 of 12% bonds on June 1, 2017. The bonds pay interest on December 1 and Ju...

A: Prepare the journal entries: 

Q: Exercise 9-16 The Blue Spruce Company is planning to purchase $496,800 of equipment with an estimat...

A: Payback period: Payback period is the anticipated time period which is required to recover the cost ...

Q: [The following information applies to the questions displayed below.]   The Shirt Shop had the follo...

A: Under FIFO cost flow assumption, the inventory received first is charged to Cost of Goods sold and t...

Q: Work-in-Process Inventory, June 1 ? Work-in-Process Inventory, June 30 55,000 gallons Un...

A: Beginning Work-in-process inventory: Beginning Work-in-process inventory represents partially finish...

Q: Calculate earned revenues Kirkland Theater sells season tickets for six events at a price of $180. I...

A: Revenue is the amount that a company earns from normal activities conducted by the business for exam...

Q: eBook Calculator Print Item Five Measures of Solvency or Profitability The balance sheet for Garcon ...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: Prepare a contribution margin format income statement China Imports, Inc., sold 18,000 units in May....

A: Contribution margin format income statement of China Imports, Inc. is prepared using MS Excel:

Q: Q1. A own > 50% voting rights of B, and has the right to appoint three out of four board members ...

A: Voting Rights Voting rights refer to the right given to the major shareholders of the company to pro...

Q: Identifying ethical risks,   A worker feels that fellow employees are not honest.    Opportunity, pr...

A: Fraud triangle:Fraud triangle is a model that describes the factors that cause people to commit occu...

Q: I am looking for help with question 4 and 5.   The Walton Toy Company manufactures a line of dolls a...

A: 4. Calculate the contribution margin with the constrained resource.

Q: Easter Supply sells a variety of merchandise to retail stores on account, but it insists that any cu...

A: Click to see the answer

Q: taxation business pass thru entitiesPlease help and show calculation

A: Net investment income is the income that is earned from investment assets such as mutual funds, loan...

Q: If I were to have accounts receivable in the millions and were $ 74 million at the beginning of year...

A: Accounts receivable turnover: This is the ratio which analyzes the number of times accounts receivab...

Q: Calculate gross profit, cost of goods sold, and selling price MBI, Inc., had sales of $600 million f...

A: Gross profit: Gross profit is the major part of the firm’s net profit. Gross profit can be calculate...

Q: Comprehensive Accounting Cycle Review 9-1 (Part Level Submission) Pina Colada Corp.’s unadjusted tr...

A: Explanation for the entry adjustmentDec 2- The Equipment cost including sales tax needs to be capita...

Q: Problem 14-2 Concord Co. is building a new hockey arena at a cost of $2,620,000. It received a downp...

A: 1. Bond issue price= Present value of bonds redemption price + present value of interest annuities p...

Q: Concord Company produces Optimist sailboats. The costs of producing 107000 tiller extensions for use...

A: Compute the increase or decrease in the net income: 

Q: Patents are asset, liability, quity, revenue or expense?

A: Assets: These are the resources owned and controlled by business as a result of a past transaction o...

Q: Hello, Silverstone's production budget for July called for making 39,800 units of a single product. ...

A: Absorption costing: The absorption costing method is a costing method that allocates the direct prod...

Q: Hi I'm stuck on this problem. My numbers aren't adding up and I'm completely lost because I have red...

A: Amortization of notes payable: Amortization of notes payable is a process in which the loan amount i...

Q: Shown below are comparative balance sheets for Sandhill Company. Sandhill CompanyComparative Bal...

A: Cash Flow Statements Cash flow statement provides information regarding cash generated or used durin...

Q: 3. A recent issued demographic report indicates that there is a reasonable probability that ABC comp...

A: Under FASB ASC Section 450-20-25-2 contingency liability needs to be recorded as an expense if it is...

Q: What prevents you from deleting the record of the vendor list? This from quitbooks.

A: Quick books has  system of accounting control  where in all users do not have access to updating mas...

Q: The setting of standard is  a/ a worker decision b/ a management decision c/ a managerial accounting...

A: Setting Standard: Setting standard means establishing the level of performance on the basis of past ...

Q: Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Resid...

A: Since we only answer up to 3 sub-parts, we'll answer the first 3. Please resubmit the question ans s...

Q: Hills Company’s June 30 bank statement and the June ledger account for cash are summarized here:   ...

A: Preparation of the bank reconciliation statements. We have,

Q: I am lost on this problem, I tried using the 'Show me how' video but I don't understand it at all. H...

A: Since we only answer upto 3 sub-parts, we'll answer the first 3. Please resubmit the question and sp...

Q: Hills Company’s June 30 bank statement and the June ledger account for cash are summarized here:   ...

A: The bank reconciliaion statement can be made in the following manner :

Q: On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as i...

A: First of all we will start by calculating the rate or capitalization.For specific borrowings we will...

Q: Calculate EPS and effect of stock split on EPS During the year ended December 31, 2017, Gluco, Inc.,...

A: Stock split: Stock Split is a method which changes the company’s total number of outstanding shares ...

Q: shown is the information needed to prepare a bank reconciliation for Warren Electric at December 31....

A: Bank Reconciliation Statement: Bank statement is prepared by bank. The company maintains its own rec...