Calculate the net present value of the new machine

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Question - Marshall, Inc. is considering the acquisition of a new piece of heavy machinery to replace an old, outdated machine that is currently used in its business operations. The new machine will cost $180,000 and is expected to last 9 years. The new machine would require a repair of $25,000 in year seven and another repair costing $8,000 in year eight. In addition, purchasing this machine would require an immediate investment of $30,000 in working capital. The working capital would be released for investment elsewhere at the end of the 9 years. The new machine is expected to have a $10,000 salvage value at the end of nine years. The old, outdated machine costs $160,000 per year to maintain and run. The new machine is only expected to cost $90,000 per year to maintain and run. Marshall Inc has a cost of capital of 16% and an income tax rate of 40%.

Required - Calculate the net present value (NPV) of the new machine. If your answer is negative, place a minus sign in front of your answer with no spaces in between (e.g., -1234).

Reference no: EM133158360

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