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