Question 4 of 7

Question 4 of 7 View Policies Show Attempt H istory Current Attempt in Progress 5/20 BioFarm Inc. wants to replace its current equ ipment with new high-tech equipment. The existing equ ipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $42,900. The new equipment can be bought for $174,340, including installation. Over its 10-year life, it will reduce operating expenses from $190,000 to $145,400 for the first six years, and from $203,600 to $193,600 for the last four years. Net working capital requirements will also increase by $20,200 at the time of replacement. It is estimated that the company can sell the new equipment for $24,400 at the end of its life. Since the new equ ipment's cash flows are relatively certain, the project's cost of capital is set at 9%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view PV table. (a) Your answer is correct. Calculate the initial investment amount. Initial investment 151640