Business, 31.05.2021 14:40 miraculousdollh

Sheridan Inc. manufactures snowsuits. Sheridan 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, Sheridan 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 $389,200
2 399,800
3 410,200
4 425,900
5 432,400
6 435,200
7 436,800

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 $379,400. This new equipment would require maintenance costs of $94,200 at the end of the fifth year. The cost of capital is 9%.

Required:
Calculate the net present value.

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Sheridan Inc. manufactures snowsuits. Sheridan is considering purchasing a new sewing machine at a c...

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