Architect Services Inc. would like to purchase a blueprint machine for \($50,000.\) The machine is expected to have a life of four years, and a salvage value of \($10,000.\) Annual maintenance costs will total \($14,000.\) Annual savings are predicted to be \($30,000.\) The company’s required rate of return is 11 percent. 

Required

a. Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.

b. Find the net present value of this investment using the format presented in Table 8.2.

c. Should the company purchase the blueprint machine? Explain.

Table 8.2

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Net Present Value Calculation for Copy Machine Investment by Jackson's Quality Copies Today Year Year Timeline (n)- 0 1 2 Year 3 Year Year 4 5 Year 6 Year 7 Purchase price $(50,000) Maintenance cost Labor savings $( 1,000) $( 1,000) 11,000 11,000 $(1,000) $( 1,000) $( 1,000) $( 1,000) $( 1,000) 11,000 11,000 11,000 11,000 11,000 Salvage value 5,000 Total cash in (out) $(50,000) $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $15,000 PV factor (r=10%) Present value 1.0000 x0.9091 x0.8264 x0.7513 x0.6830 X0.6209 x0.5645 X0.5132 $(50,000) + $ 9,091 + $ 8,264 $ 7,513 $ 6,830 +$ 6,209 +$ 5,645 + $ 7,698 Because net present value (NPV) is 0, accept the investment. (The investment provides a return greater than 10%.) = $1,250 Ner Present Value