Salia Manufacturing Inc (SMI) makes parts for the rail industry. Although the rail industry has been somewhat volatile over the years SMI is currently very busy and operating at full capacity. SMI has an opportunity to purchase a new piece of equipment (a B26G) that is more flexible than their current machine allowing them to produce various kinds of parts rather than just one. The B26G is also faster than the old machine with an increased production capacity of 30%. SMI has determined that they can swap out the old machine for the B26G very quickly so they would not lose any of their current jobs. However, there would be a cost of 20000 to dispose of the old machine and an estimated cost of terminating three operators of 55000. Reduced wage costs are estimated at 150000 per year as the number of people involved in manufacturing would drop from 9 to 6. Maintenance costs on the B26G are forecasted at 6500 per year for the final 6 years while the first year is covered by warranty. Maintenance costs on the current machine average 14000 per year. Utility costs are expected to decrease by 1000 per month.

Rachel Salia would have to borrow 100000, which, along with her current cash in the bank, would give her enough to purchase the B26G at a cost of 600000. The purchase payment is due in two payments, one upfront and the second one of 175000 at the end of year one. Annual interest payments on the loan are payable at the end of each year for 5 years at an annual loan interest rate of 5 %. There is a lump sum principal repayment at the end of year 5 for the whole loan. The estimated life on the B26G is 7 years with an estimated salvage value of 56000. Her current machine would also last 7 years but would require repairs at the end of year estimated at 4500 in year 1, 7000 in year 3,9000 in year 5, and10500 in year 7; it will have no residual value. Salia requires a 14% rate of return on all investments.

What is the NPV if SMI decides to purchase the B26G? Show your work detailing the solution to this question in the mandatory Excel spreadsheet on Moodle called "Final Exam Salia Manufacturing Question mandatory template" and upload your Excel spreadsheet into the Final Exam Upload Folder (20 marks). Providing the NPV without showing your work in the Excel spreadsheet is worth zero.