Blossom Inc. manufactures snowsuits. Blossom is considering purchasing a new sewing machine at a cost...
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Blossom Inc. manufactures snowsuits. Blossom 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, Biossom spent $55,000 to keep it operational. The existing sewing machine can be sold today for $243.255. 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 : 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 $379,700. This new equipment would require maintenance costs of $98,400 at the end of the fifthyear. The cost of capital is 9% Use the net present value method to determine the following: (If net present volue is negative then enter with negative sign preceding the number e.8. -45 or parentheses e.8. (45). Round present volue answer to 0 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 Determine whether Blossom should purchase the new machine to replace the existing machine
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