Question

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3.07 million and will last for six years. Variable costs are 34% of sales, and fixed costs are $1,930,215 per year. Machine B costs $4.87 million and will last for nine years. Variable costs for this machine are 25% of sales and fixed costs are $1,356,597 per year. The sales for each machine will be $4.1 million per year. The required return is 12 %, and the tax rate is 38%. Both machines will be depreciated to zero on a straight-line basis. Each project will require an increase in inventory of $399,260, an increase in accounts receivable of $713,337, and an increase in accounts payable of $438,678. Assume a salvage value of $724,001 for both machines.

Calculate the NPV for machine B. (Round answer to 2 decimal places. Do not round intermediate calculations)

Answer 1