Michener Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of eight years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $39,500. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 12%.

Calculate Net Present Value and Present value of reduction in downtime.