Capital Investments Project
DC Company is considering the purchase of a new machine.
The price of the new machine is $122,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years.
Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped.
DC Co’s accountant, Erica, has accumulated the following data regarding annual sales and expenses with and without the new machine.
(Note: These gross profit rates do not include depreciation on the machines. For purposes of determining net income, treat depreciation expense as a separate line item.)
Use excel or google sheets for all quantitative calculations. You must demonstrate all calculations using formulas in your spreadsheet.
Answer the following. (Ignore income tax effects.)
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