In November $2015,$ Martina Bellucci, managing director of Fonderia del Piemonte S$.$p$.$A$.,$ was considering the purchase of a Thor MM$-9$ automated molding machine. This machine would prepare the sand molds into which molten iron was poured to obtain iron castings. The Thor MM$-9$ would replace an older machine and would offer improvements in quality and some additional capacity for expansion. Similar molding$-$machine proposals had been rejected by the board of directors for economic reasons on three previous occasions, most recently in $2014.$ This time, given the size of the proposed expenditure of nearly EUR$2$ million.

The Thor MM$-9$ Machine

The new molding machine would replace six semiautomated stamping machines that together had originally cost EUR$423,000.$ Cumulative depreciation of EUR$169,200$ had already been charged against the original cost and six years of depreciation charges remained over the total useful life of $10$ years. Fonderia del Piemonte$$s management believed that those semiautomated machines would need to be replaced after six years. Bellucci had recently received an offer of EUR$130,000$ for the six machines.

The current six machines required $12$ workers per shift$3(24$ in total$)$ at EUR$14\mathrm{.}66$ per worker per hour, plus the equivalent of two maintenance workers, each of whom was paid EUR$15\mathrm{.}70$ an hour, plus maintenance supplies of EUR$6,000$ a year. Bellucci assumed that the semiautomated machines, if kept, would continue to consume electrical power at the rate of EUR$15,300$ a year.

The Thor MM$-9$ molding machine was produced by an American company in Allentown, Pennsylvania. Fonderia del Piemonte had received a firm offering price of USD$1\mathrm{.}9$ million from the American firm. Since the prevailing exchange rate between the euro and the U$.$S$.$ dollar was $1\mathrm{.}06$ USD per euro, the price in euros was EUR$1\mathrm{.}8$ million. The estimate for modifications to the plant, including wiring for the machine$$s power supply, was EUR$100,000.$ Allowing for EUR$50,000$ for shipping, installation, and testing, the total cost of the Thor MM$-9$ machine was expected to be EUR$1\mathrm{.}95$ million, all of which would be capitalized and depreciated for tax purposes over eight years. Bellucci assumed that, at a high and steady rate of machine utilization, the Thor MM$-9$ would be worthless after the eighth year and need to be replaced.

The new machine would require two skilled operators $($one per shift$),$ each receiving EUR$22\mathrm{.}72$ an hour $($including benefits$),$ and contract maintenance of EUR$120,000$ a year, and would incur power costs of EUR$40,000$ yearly. In addition, the automatic machine was expected to save at least EUR$30,000$ yearly through improved labor efficiency in other areas of the foundry.

With the current machines, more than $30\%$ of the foundry$$s floor space was needed for the wide galleries the machines required; raw materials and in$-$process inventories had to be staged near each machine in order to smooth the workflow. With the automated machine, almost half of that space would be freed for other purposes$$although at present there was no need for new space.

Certain aspects of the Thor MM$-9$ purchase decision were difficult to quantify. First, Bellucci was unsure whether the tough collective$-$bargaining agreement her company had with the employees$$ union would allow her to lay off the $24$ operators of the semiautomated machines. Reassigning the workers to other jobs might be easier, but the only positions needing to be filled were unskilled jobs, which paid EUR$9\mathrm{.}13$ an hour. The extent of any labor savings would depend on negotiations with the union, The Thor MM$-9$ had a theoretical maximum capacity that was $30\%$ higher than that of the six semiautomated machines; but those machines were operating at only $90\%$ of capacity.

Question

What is the initial outlay, the benefits overtime, an appropriate discount rate and what is the NPV warrant the investment in the machine?