Question

Hillsong Inc. is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million. Hillsong has already spent $55,000 to keep the existing machine operational six months ago. The existing sewing machine can be sold today for $250,000.

Which of the following is the initial net investment required to purchase the new sewing machine?
(A) $2.45 million
(B) $2.2 million
(C) $2.15 million
(D) $1.9 million

Answer 1

The initial net investment required to purchase the new sewing machine for Hillsong Inc. is $2.2 million.

Step-by-step explanation:

The initial net investment required to purchase the new sewing machine for Hillsong Inc. is calculated by taking into account the cost of the new machine, the proceeds from selling the existing machine, and any additional expenses incurred.

The cost of the new sewing machine is $2.45 million.

The proceeds from selling the existing machine is $250,000.

Therefore, the initial net investment required is calculated as follows:

Net Investment = Cost of New Machine - Proceeds from Selling Existing Machine

Net Investment = $2.45 million - $250,000 = $2.2 million

So, option (B) $2.2 million is the correct answer.