Axis is planning to buy a new machine that operate to closer tolerances than the exiting machine and it is somewhat more efficient. This machine, which costs $100,000, would yield a cash savings of 10,000 per year for 10 years because of improved efficiency. An appropriate discount rate is 10%. Time value of money factors are:

10% for 10 years

PV: 0.386

PV of an Annuity: 6.145

FV: 2.594

FV of an annuity: 15.937

What would Axis have to attribute to the closer tolerances to justify the purchase? If I did my present value computations correctly, the cash savings does not justify the purchase. The purchase could only be justified by assigning a value to the closer tolerances.

(correct answer is $38,554, please show work for how to get that)