Hilltop Pharmacy is considering the purchase of an automated pill machine that fills prescriptions. The machine costs $500,000 and will last five years before becoming obsolete. The system will be depreciated using a three-year MACRS schedule and will be worth $100,000 at the end of five years.
The machine will allow Hilltop to reduce staffing and save $250,000 annyally. The machine requires higher levels of inventory. Therefore, the project will require an additional $15,000 in working capital at the beginning of the project and an additional $4,000 in each subsequent year. All NWC investments will be recovered in the last year.
Hilltop has a 25 percent tax rate and expects an 8 percent return from its projects.
What is the project NPV?