Exercise 9-2 Blue Spruce Vita produces a wide range of herbal supplements sold nationwide through...
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Exercise 9-2 Blue Spruce Vita produces a wide range of herbal supplements sold nationwide through independent distributors. In response to an increasing demand for its products, the company is considering the purchase of a new packaging machine to replace the seven-year-old machine currently in use. The new machine will cost $175,050, and installation will require an additional $3,250. The machine has a useful life of 10 years and is expected to have a salvage value of $3,765 at that time. The variable cost to operate the new machine is $11.65 per carton compared to the current machine's variable cost of $11.74 per carton, and Blue Spruce Vita expects to pack 257,000 cartons each year. If the new machine is purchased, Blue Spruce Vita will avoid a required $11,425 overhaul of the current machine in four years. The current machine has a market value of 13,075 Identify the amount and timing of all cash flows related to the acquisition of the new packaging machine. (Enter negative amounts using a negative sign preceding the number e.g.-45 or parentheses e.g. Cash Flow ing Amount Purchase price Installation Salvage of old equipment Salvage of new equipment Variable cost savings Avoided overhaul
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