Samuel Manufacturing Inc. is evaluating new machinery in its factory. The machinery would replace existing equipment. The new machinery would cost $430,000, would last 6 years, and would have a salvage value of $36,000. The existing machinery currently has a net book value of $72,000 and could be sold for $65,000. If kept, the old machine would have a salvage value of $5,000 in 6 years time. The new machinery is expected to lower direct labour costs by $22,000 per year. The current variable overhead rate is 120% of direct labour. Other annual cost savings are projected to be $15,000. Due to the reduction in the production cycle time, working capital requirements will decrease by $8,000 during the life of the new machine. Ignore income taxes.

Required:

Calculate the net present value of replacing the existing equipment at a 12 percent required rate of return.