(Ignore income taxes in this problem.) A newly developed device is being considered by Fairway Foods for use in processing and canning peaches. The device, which is available only on a royalty basis, is reported to be a great labor saver. Fairway's production manager has gathered the following data:

						Present Labor		Proposed Royalty
						Method		Method
Per year
Labor cost					$	55,000	$	7,000
Royalty cost							$	24,000
Initial start up costs associated with the new device							$	200,000
The new device must be ontained through a licensing arrangement with the developer. The license period
lasts for only 8 years. Fairway Food's require rate of return is 10%.
Required:
a. By use of the incremental cost approach, compute the net present value of the proposed licensing of
the new device. (negative amount should be indicated by a minus sign. Round "PV factor" to 3
decimal places. Round your other intermedate calculations and final answers to the nearest
whole dollar. ) (use exhibit 11b-2)
Net present value			$