Case 3-Version 1 Deluxe Piano Company is planning to purchase a machine capable to do certain operations that are now performed manually. This machine will cost $35,000, and it will last for five years. At the end of the fifteen-year period, the machine will have residual value of zero. Moreover, use of the machine will reduce labour costs by $8,000 per year. Deluxe Piano Company requires a minimum return of 15 percent before taxes on all investment project. Required: 1. Should the machine be purchased? Use the net present value method in your calculation. 2. What is the payback period for this machine? 3. Which method would you prefer and why? PV of Future Cost Savings PV=FV/(1+1) Future Cost Savings Year 1 $8,000 Year 2 $8,000 Year 3 $8,000 Year 4 $8,000 Year 5 $8,000 Total NPV Calculation: PV of Future Cost Savings Less: Initial Cost of Investment Net Present Value (NPV)