Kate$$s Candy Corporation makes chewy chocolate candies at a plant in Winston$-$Salem, North Carolina. Steve Bishop, the production manager at this facility, installed a packaging machine last year at a cost of $$630,000.$ This machine is expected to last for $10$ more years with no residual value. Operating costs for the projected levels of production, before depreciation, are $$126,000$ annually.

Steve has just learned of a new packaging machine that would work much more efficiently in the production line. This machine would cost $$730,800$ installed, but the annual operating costs would be only $$50,400$ before depreciation. This machine would be depreciated over $10$ years with no residual value. He could sell the current packaging machine this year for $$315,000.$

Steve has worked for Kate$$s Candy for $7$ years. He plans to remain with the firm for about $2$ more years, when he expects to become a vice president of operations at his father$-$in$-$law$$s company. Kate$$s Candy pays Steve a fixed salary with an annual bonus of $5\%$ of net income for the year.

Assume that Kate$$s Candy uses straight$-$line depreciation and has a $10\%$ required rate of return. Ignore income tax effects.

Required:

$1.$ What is the estimated net present value of purchasing the new machine? $($Do not round intermediate calculation. Round your answers to the nearest whole dollar amount.$)$

$2.$ How much would Steve Bishop$$s compensation be increased or decreased by the investment? $($Negative amounts should be indicated by a minus sign.$)!$

Required Information

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Kate's Candy Corporation makes chewy chocolate candles at a plant In Winston$-$Salem, North Carolina. Steve Bishop, the

production manager at this facility, Installed a packaging machine last year at a cost of $$630,000.$ This machine is

expected to last for $10$ more years with no residual value. Operating costs for the projected levels of production, before

depreciation, are $$126,000$ annually.

Steve has just learned of a new packaging machine that would work much more efficlently in the production IIne. This

machine would cost $$730,800$ Installed, but the annual operating costs would be only $$50,400$ before depreclation. This

machine would be depreclated over $10$ years with no residual value. He could sell the current packaging machine thls year

for $$315,000.$

Steve has worked for Kate's Candy for $7$ years. He plans to remain with the firm for about $2$ more years, when he expects

to become a vice president of operations at his father$-$In$-$law's company. Kate's Candy pays Steve a fixed salary with an

annual bonus of $5\%$ of net income for the year.

Assume that Kate's Candy uses straight$-$IIne depreclation and has a $10\%$ required rate of return. Ignore income tax effects.

Requlred:

What is the estimated net present value of purchasing the new machine? $($Do not round Intermedlate calculatlon. Round your

answers to the nearest whole dollar amount.$)$

How much would Steve Bishop's compensation be Increased or decreased by the Investment? $($Negatlve amounts should be

Indlcated by a minus s$|$gn$.)$