The new machine will cost $$1,200,000$ and has an estimated life of $5$ years. Incremental sales are expected to be $$350,000$ for the first year, and are expected to grow by $5\%$ per year. Cost of goods and other operating expenses are expected to be $$155,000$ in the first year and are expected to grow by $3\%$ per year. The following additional information is provided:

$$ The project will last for $4$ years.

$$ At the end of the project the new machine will be sold and is expected to have a disposal

value of $$675,000.$

$$ Working capital requirements are $10\%$ of EBITDA. Working capital is assumed to be needed at the beginning of each year.

$$ The warehouse space used for the new project could have otherwise been rented out to the Justice League for $$65,000$ per year.

$$ Tony will be able to cease using an existing machine used on products that will become redundant. The existing machine has a disposable value of $$75,000$ and has a current book value of $$0$

$$ Tony says that the new project will help absorb $$60,000$ of head office costs. This in accordance with the companies policy of allocating all corporate overheads to division based on sales.

$$ The company will fund the new machine by borrowing $$1,200,000$ at $7\%$ p$.$a$.$

$$ Sales of the new product are expected to reduce sales of an existing product. It has been estimated that sales in the existing product will decline by $120$ per year. Information on the existing product is as follows:

$$ Sale Price per unit $$1,200$

$$ Variable Cost per unit $ $1,000$

$$ The tax rate is $30\%.$ Tax is payable in the same year the profit is earned.

$$ Except for initial outlays, assume cash flows occur at the end of the year.

$$ Tony$$s cost of capital is $12\%$

Calculate the net present value of the proposal to purchase the new machine.