Net Present Value Method—Uneven Cash Flows Southside Junk Yard needs to buy a car smasher. The machine would add the following revenues to the business over the next three years:

Year 1 Cash savings  $30,000 Year 2 Cash savings plus additional scrap sales  $40,000 Year 3 Cash savings plus additional scrap sales  $55,000 The initial cost of the machine is $100,000. At the end of three years, its salvage value is estimated at $20,000. The firm has a cost of capital of 12%.

Required:

Using the net present value method, determine whether the company should purchase the machine. (Ignore income tax effects.)