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 31% of sales, and fixed costs are $2,010,237 per year. Machine B costs $5.09 million and will last for nine years. Variable costs for this machine are 21% of sales and fixed costs are $1,394,417 per year. The sales for each machine will be $5.2 million per year. The required return is 9 %, 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 $322,321, an increase in accounts receivable of $672,496, and an increase in accounts payable of $408,344. Assume a salvage value of $766,864 for both machines.

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

Answer 1