Brookfield Furniture is considering purchasing a new automated manufacturing system. The current system, which is still operational, has an estimated salvage value of $25,000. The new system costs $300,000 and requires an additional working capital investment of $50,000. The new system is expected to generate $120,000 in additional annual cash flows for the next five years, after which it will have a zero salvage value. The company’s required rate of return is 8%. The investment also includes one-time setup costs of $20,000 in the first year. Calculate the net present value (NPV) of the investment and determine if the company should proceed with the purchase.

Requirements:

1. Calculate the NPV of the investment.
2. Determine if the investment should be made based on NPV.
3. Consider the salvage value of the current system.
4. Include the additional working capital and setup costs.
5. Use a discount rate of 8%.