manufactures babyfurniture, clothing,strollers, and accessories. In the current year the company plans on purchasing a new machine to improve the quality and efficiency of production.

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has prepared estimates of future cash flows over the following fouryears, at which point it will sell the machine for

$11,000.

The company focuses on tax minimization and calculated depreciation over the four years using thestraight-line method, a useful life of fouryears, and a residual value of$0.

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Part 1

Requirement 1.Calculate the net present value of the investment.(Use factors to three decimalplaces, X.XXX. Use a minus sign or parentheses for a negative net present value. Round your final answer to the nearest wholedollar.)

The net present value of the investment is

$enter your response here.

Relevant Cash Flows at End of Each year Today 1 2 3 4 Initial investment (216,000) Annual cash flows from operations (excluding depreciation) 27,000 27,000 27,000 27,000 Cash flow from sale of machine 11,000 Required return on investment 8% Income tax rate 30% Depreciation method straight-line CCA rate declining balance for income tax purposes 20% All CF occur at end of year except for the initial investment.

1.	Calculate the NPV of the investment.
2.	Should the company purchase the newmachine?