The owner of WS Industries, Jayant Krishnan, is considering the purchase of an advanced milling machine. This

Question:

The owner of WS Industries, Jayant Krishnan, is considering the purchase of an advanced milling machine. This machine costs $2,500,000 to purchase. Installing the machine, calibrating it and training operators will cost another $500,000. Jayant expects the machine to reduce materials costs by 20% and labor time by 40%. He expects the machine to have a useful life of five years, with zero .
Currently, Jayant makes 200,000 units of the product annually. For each unit, he incurs $8 in materials cost and $12 in labor costs. WS Industries’ is 14% and it pays income taxes at the rate of 35%. Assume straight-line depreciation for tax purposes.

Required:
What is the NPV for the project?

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