Rambus Inc. would like to purchase a production machine for $325,000. The machine is expected to have a life of three years, and a salvage value of $50,000. Annual maintenance costs will total $12,500. Annual savings due to the use of this machine are predicted to be $112,500. The company's required rate of return is 12 percent.

Required:

A. Calculate the net present value of this investment (ignoring taxes). B. Based on your answer in requirement 1, should Rambus purchase the production machine?