Unformatted text preview: Budgeting Cash Flows 383 a. Covol would be able to use the same tooling, which had a book value of
$40,000, on the new machine tool as it had used on the old one.
b. Covol would be able to use its existing computer system to develop programs
for operating the new machine tool. The old machine tool did not require
these programs. Although the firm’s computer has excess capacity available,
the capacity could be leased to another firm for an annual fee of $17,000.
c. Covol would have to obtain additional floor space to accommodate the
larger new machine tool. The space that would be used is currently being
leased to another company for $10,000 per year.
d. Covol would use a small storage facility to store the increased output of the
new machine tool. The storage facility was built by Covol 3 years earlier at a
cost of $120,000. Because of its unique configuration and location, it is currently of no use to either Covol or any other firm.
e. Covol would retain an existing overhead crane, whi...
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