Sampson Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery. The machinery will cost $550,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $55,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of Year 5. A $50,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of 95,000 per year for each of the 10 years. Sampson's discount rate is 16%.

Required:What is the net present value of this investment opportunity?
Based on your answer to (a) above, should Sampson go ahead with the new conditioning shampoo?

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tems YearsAmount 16% Factor Present Value Cost of machinery Now (S550,000) (S550,000) Working capita Now increase (S50,000) (S50,000) $95,000 4.833 Annual cash inflows 1-10 459,135 ($35,000) $55,000 $50,000 Overhaul 0.476 (S16,660) Salvage value 10 0.227 12,485 Working capital 10 release 0.227 11,350 Net present value ($133,690)