Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will also reduce downtime because of its reliability. Assume the discount is 8%. In order to make the project acceptable, the reduction in downtime must be worth

Year Present value of 1 at 8% Present Value of Annuity 1 at 8%

1 .926 .926

2 .857 1.783

3 .794 2.577

4 .735 3.312

5 .681 3.993

A) $45,263 per year B) $18,264 per year C) $49,662 per year D) $23,958 per year