Marinis Corporation is considering buying a brand new machine and has gathered the following data:

Investment$105,900Estimated life5 yearsEstimated annual cash inflows$30,100Estimated annual cash outflows$10,200

Salvage value for the machine is estimated to be zero.

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(a)

Your answer is correct.

Calculate the net present value of the machine assuming a 5% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. Round present value answer to 0 decimal places, e.g. 125.)

Net Present Value$

Should the company buy the machine based on your results?

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(b)

Further investigation reveals that there would be a sales increase of $7,200 annually as a result of an increase in quality from the customer's perspective and a cost reduction of $3,000 annually as a result of lower warranty claims. Considering these additional facts, calculate the Net Present Value of the machine. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. Round present value answer to 0 decimal places, e.g. 125.)

Net Present Value$

Should the company buy the machine?

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