Reference no: EM131883777

Hillsong Inc. manufactures snowsuits. Hillsong 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; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $241,115. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $389,000 2 400,400 3 411,000 4 425,700 5 433,800 6 435,200 7 437,500 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,100. This new equipment would require maintenance costs of $95,300 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value. Net present value $ Determine whether Hillsong should purchase the new machine to replace the existing machine?