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Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost...

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Accounting

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 $243,956. 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 $391,000

2 399,900

3 410,300

4 425,600

5 432,100

6 435,200

7 437,300

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 $379,400. This new equipment would require maintenance costs of $98,600 at the end of the fifth year. The cost of capital is 9%.

Calculate the net present value

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