Hiland Inc. manufactures snowsuits. Hiland 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, Hiland spent $55,000 to keep it operational. The existing sewing machine can be sold today for $243,564. 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		$389,300
	2		399,600
	3		410,000
	4		426,000
	5		433,500
	6		435,300
	7		437,100

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 $379,900. This new equipment would require maintenance costs of $98,500 at the end of the fifth year. The cost of capital is 9%.

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(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer for present value to 0 decimal places, e.g. 125.)

Calculate the net present value.

Net present value

$

Should Hiland Inc. purchase the new machine to replace the existing machine?

YesNo

IE

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