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Wilson Machine Tools is considering a high-tech computer-controlled milling machine at a cost of $73,000. The cost of installing the machine, preparing the site, wiring,

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"Wilson Machine Tools is considering a high-tech computer-controlled milling machine at a cost of $73,000. The cost of installing the machine, preparing the site, wiring, and rearranging other equipment is expected to be $20,000. This installation cost will be added to the cost of the machine to determine the total cost basis ($93,000) for depreciation. The milling machine is expected to last 6 years. The machine is classified as a seven-year MACRS property. The milling machine will have a $29,000 salvage value at the end of 6 years. Special jigs and tool dies for the milling machine also will be required at a cost of $8,000, and the jigs and dies last only 3 years. Therefore, another set of jigs and dies has to be purchased at the end of year 3, so you should also include the purchase of jigs and dies as another investment in year 3. There is no salvage or disposal cost for the jigs and dies. The jigs and dies are classified as a three- year MACRS property, and you need to depreciate them twice (the first time through years 1 through 3 and the second time in years 4 through 6). Since the jigs and dies have no salvage value but will not be fully depreciated at the end of year 3 and year 6. Wilson will receive a tax refund for the jigs and dies. It will be easier to have separate rows for depreciating the milling machine and depreciating the jigs and dies. With the new milling machine. Wilson expects an additional annual revenue of $91,000 due to Increased production. The additional annual production costs are estimated as follows: materials, $7,500: labor $15,000; energy $4,100; and miscellaneous O&M costs $4,000. Wilson s marginal income tax rate is expected to remain at 45% over the project life of 6 years. All dollar figures glven above represent today's (constant) dollars. The expected general inflation rate during the project period is estimated at 4.7%, which applies to the revenue, the expenses (materials, labor, energy, O&M), the salvage value, and the cost of purchasing the jigs and dies at the end of 3 years. If Wilson's inflation-free interest rate (MARR) is 18.1%, calculate the net present worth of the cash flow for the computer-controlled milling machine project after accounting for inflation

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