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A new machine for Volusia Shipyards will cost $ 2 4 2 , 0 0 0 ( including shipping and installation ) and have an

A new machine for Volusia Shipyards will cost $242,000(including shipping and installation) and have an estimated life of 10 years, though you only need the machine for an estimated 4 years, at which point Volusia can sell the machine for $44,000. The new machine will allow additional sales of 1,500 units per year at $200 sales price per unit (today) with costs of $95 per unit (today). These amounts will increase by an expected 3% inflation rate, annually. The new machine will be depreciated over the 3-year MACRS recovery period. Use the (slightly simplified) depreciation rates of 33% for year 1,45% for year 2,15% for year 3, and the remainder for year 4. This project will require increased NWC of 11% of the following year's projected sales (e.g., increase NWC today would be 11% of year 1's sales). NWC increases may be 'recovered' at the end of the project. The applicable corporate tax rate is 23%, and the project cost of capital is 14%. What is the NPV of Volusia acquiring the new machine? Should they do so?(15)
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