Management is considering purchasing a machine for $780,000 that would have a useful life of 8 years and $52,000 salvage value. The asset would generate annual net cash inflows of $121,500 throughout its useful life. The project would require additional working capital of $95,000. The companys discount rate is 5%. In year 6 the machine will require $28,000 overhaul.

What is the net present value of the machine salvage value in year 8?

What is the PV factor used to calculate the NPV of the Annual net cash flows?

What is the net present value of the annual net cash flows?

Should we accept or reject the purchase of the new machine?