Reference no: EM133069174

Tech Mfg. is thinking about replacing an existing drill press. The existing press was purchased 2 years ago for $78,000 with a salvage value of $9,000. It will last for three more years and then will be scrapped. It can be sold today for $37,000. A new press can be purchased for $95,000 with an expected salvage value of $10,500 at the end of its three-year life. The new press will decrease labor costs $18,000 per year. Sales generated by this drill press are expected to increase by $350,000 per annum growing at 6% per annum. Press has a gross profit margin of 20%. Press uses 11% for its cost of capital and has an ordinary income tax rate of 25%. The project will be financed with a 9% 3-year loan. Press has an average collection period of 70 days, 25 days of inventory and 35 days of payables. The firm uses straight line depreciation for all long-term assets. What is the NPV of the project.