Calculate the net present value of all cash flows to determine whether or not the machine should be purchased.

7. Wild West Inc. must determine whether it should purchase a new machine costing $1,500,000. Wild West will also spend $150,000 to install and do the initial testing on the machine. The machine has a useful life of 15 years and will be depreciated uniformly (straight- line) over its useful life. . If the new machine is purchased, an old machine costing $500,000 with a book value of . The new machine will require a working capital investment of $100,000 that will be . The machine is expected to generate annual cash savings of $150,000. $250,000 will be sold for $200,000. released at the end of the project. At the end of year 10, the machine will require maintenance costing $250,000. This cost is considered an expense. . At the end of the machine's useful life (15 years), it will be sold for $75,000 Wild West's cost of capital is 10% and its tax rate is 20%. . Calculate the net present value of all cash flows to determine whether or not the machine should be purchased. 107