Q3

A manufacturing company is evaluating a new machine that costs $300,000. The machine has an expected life of 4 years and no salvage value. It is expected to generate additional revenues of $120,000 per year and additional operating expenses of $20,000 per year. The company uses a discount rate of 12%. The present value factors are as follows:

Year	PV Factor
1	0.893
2	0.797
3	0.712
4	0.636

Requirements:

1. Calculate the annual net cash flow from the machine.
2. Determine the present value of these cash flows.
3. Compute the NPV of the investment.
4. Calculate the payback period.
5. Should the company invest in the machine? Justify your answer.