Use the information below to answer the following question(s).Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine.The existing machine is operable for three more years and will have a zero disposal price.If the machine is disposed of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.These cash flows will generally occur throughout the year and are recognized at the end of each year.Income taxes are not considered in this problem.
-Weston Ltd.is considering investing in a new piece of equipment for its factory.It estimates that the machine will generate an additional $120,000 per year in revenues.The contribution margin on these incremental revenues is estimated at 40%.Incremental annual fixed costs are estimated to be $8,200.The equipment would have a salvage value of $14,000 at the end of 6 years.The company's required rate of return is 13%.What is the net present value of this investment if the equipment costs $250,000? (Ignore income taxes.)
A)$2,800
B)($51,393)
C)$204,803
D)$11,768
E)($84,173)

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The Answer of Use the information below to answer the following question(s).Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine.The existing machine is operable for three more years and will have a zero disposal price.If the machine is disposed of now, it may be sold for $30,000.The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required and will be returned at the end of the project.The machine is expected to last 3 years and has an estimated disposal value at that time of $20,000.The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs.The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use.These cash flows will generally occur throughout the year and are recognized at the end of each year.Income taxes are not considered in this problem.
-Weston Ltd.is considering investing in a new piece of equipment for its factory.It estimates that the machine will generate an additional $120,000 per year in revenues.The contribution margin on these incremental revenues is estimated at 40%.Incremental annual fixed costs are estimated to be $8,200.The equipment would have a salvage value of $14,000 at the end of 6 years.The company's required rate of return is 13%.What is the net present value of this investment if the equipment costs $250,000? (Ignore income taxes.)
A)$2,800
B)($51,393)
C)$204,803
D)$11,768
E)($84,173)

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