Mr. Ambitious is considering the purchase of a new machine to be used in his dry-cleaning business. The following after-tax cash savings are expected from the $40,000 investment over the next 5 years: years 1 and 2, $15,000 per year; years 3, 4, and 5, $10,000 per year.

a. What is the net present value, assuming a required rate of return of 8%?

b. Should the machine be purchased?