Blue Water Ltd is planning to buy a new manufacturing machine which will reduce production costs by 10%. The machine will cost $150,000 to purchase and a further $10,000 to install. It is estimated that the new machine will generate annual cost savings of $40,000 over the next ten years, and annual maintenance costs of $10,000 will be incurred. The manager of Blue Water Ltd expects that this investment should earn a rate of return of at least 10 percent. The present value annuity factor for 10 years at 10 percent is 6.145