Q7. Wildhorse Inc. manufactures snowsuits. Wildhorse is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased 5 years ago at a price of $1.8 million; six months ago, Wildhorse spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,165. 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		$390,800
	2		399,000
	3		410,800
	4		425,700
	5		432,700
	6		434,700
	7		437,600

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 $95,300 at the end of the fifth year. The cost of capital is 9%. Click here to view the factor table. 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 present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value.

Net present value

$enter the net present value in dollars rounded to 0 decimal places

Determine whether Wildhorse should purchase the new machine to replace the existing machine?

select an option YesNo