You are considering adding a new item to your company\'s line of products. The machine required to manufacture the item costs $600,000. The shipping costs are $2,000 and the installation costs are $28,000. It falls into the three-year MACRS classification. The MACRS three-year depreciation rates are 33%, 45%, 15%, and 7%. The new item would immediately require an investment in NWC of %55,000. You plan to market the items for three years and then sell the machine for $120,000. You expect to sell 30,000 items per year at a price of $22,000 per year. You expect variable manufacturing costs to be $10 per item and fixed costs to be $80,000 per year. If the tax rate is 35% and your weighted average cost of capital is 10% per year, what is the net present value of selling the new item?
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