Problem $5$

Novak Industries is considering the purchase of new equipment costing $$1,110,000$ to replace existing equipment that will be sold for $$170,000.$ The new equipment is expected to have a $$230,000$ salvage value at the end of its $5-$year life. During the period of its use, the equipment will allow the company to produce and sell an additional $30,200$ units annually at a sales price of $$20$ per unit. Those units will have a variable cost of $$10$ per unit. The company will also incur an additional $$70,000$ in annual fixed costs.

Identify the amount and timing of the followingl cash flows related to the acquisition of the new equipment. Not all cash flows below are listed. Complete only the items below. $(2$ points each response. $12$ points total$)$

Cash Flow

a$.$ Purchase of New Equipment

b$.$ Sales Revenue

c$.$ Variable Costs

Timing

$$

$q,$

$q,$

Amount

$$

$$

$$

Problem $6$

Sandra wants to buy a car when she graduates from Central University $5$ years from now. She believes that she will need $$25,800$ to buy the car.

Calculate how much money Sandra must put into her savings account today to have $$25,800$ in $5$ years, assuming she can earn $10\%$ compounded annually.

Amount $(8$ points$)$