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The firm currently produces safety glasses using a machine called the Glasses-O-Matic. This existing machine is at the end of its useful life, so the firm would be required to buy a new machine immediately if they decide to proceed with this technology. The existing machine has been fully depreciated, however can be currently sold at a salvage value of $50,000. The new machine can be purchased at a price of $1,200,000. While the new machine requires an initial net working capital of $100,000, New York Ltd.s current level of net working capital is only $80,000. The subsequent net working capital requirement will be 15% of sales revenue. The Glasses-O-Matic has an economic life of five years, and the table below summarises the number of units this machine is able to produce each year across its useful life:

Year 1	Year 2	Year 3	Year 4	Year 5
130,000	115,000	95,000	120,000	105,000

The Glasses-O-Matic has a variable cost of $4 per unit and a fixed cost of $250,000 per annum.

The modern technology that is available to manufacture safety glasses is the Glasses3000 machine. New York Ltd have already paid $500,000 to engage in a feasibility study, which determined that the Glasses3000 would be able to produce their existing product. This new machine costs $5,000,000 and has a useful life of four years. Due to modern technology, this machine would require less investment in net working capital which will be $70,000 initially and 10% of sales revenue in the subsequent years. As noted previously, New York Ltd.s current level of net working capital is $80,000. The table below summarises the number of units this machine is able to produce each year across its useful life:

Year 1	Year 2	Year 3	Year 4
400,000	350,000	390,000	225,000

The Glasses3000 machine has a variable cost of $3 per unit and a fixed cost of $500,000 per annum.

The company manufactures all its products at the same rented factory on the outskirts of Newcastle. The current rent for this facility is $500,000 per annum. With the Glasses-O-Matic, the rent will increase to $600,000 per annum. However, as the Glasses3000 takes up significantly more floor space than the Glasses-O-Matic, Newcastle Ltd would need a larger factory if they decided to invest in this new machine. The landlord also owns an adjoining factory and has offered New York Ltd to rent both premises for a combined cost of $850,000 per annum. The CEO of New York Ltd earns an annual salary of $650,000. Although the CEOs salary does not increase irrespective of the company goes for Glasses-O-Matic or Glasses3000, 10% of the salary is attributed to the companys safety glass producing project for the accounting purpose. The human resources department at New York Ltd costs $3,000,000 per annum to run. The department is very lean at this moment, therefore, its size needs to be increased by 10% if the company wants to continue with Glasses-O-Matic or goes for Glasses3000.

Regardless of which technology is used to produce safety glasses, they are expected to have a sale price of $12 per unit. All sales made by New York Ltd are cash only. Both machines are depreciated on an straight-line basis across their useful life and neither machine is expected to have a salvage value at the end of its life. New York Ltd has an effective corporate tax rate of 40% and capital gain tax rate of 35%. You have estimated that the required rate of return on both of these projects is 10% per annum.

Calculate the NPV for the Glasses-O-Matic and Glasses3000.

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