Question

Burger Botanicals 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 $150,000, and installation will require an additional $3,000. The machine has a useful life of 10 years and is expected to have a salvage value of $4,000 at that time. The variable cost to operate the new machine is $10 per carton compared to the current machine's variable cost of $10.10 per carton, and Burger expects to pack 250,000 cartons each year. If the new machine is purchased, Burger will avoid a required $10,000 overhaul of the current machine in three years. The current machine has a market value of $12,000.
Required
Identify the amount and timing of all cash flows related to the acquisition of the new packaging machine.



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  • CreatedFebruary 21, 2014
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