Ramsey wants to buy a mat guillotine. The machine will cost $1,100 and he has developed the following estimates:

Cost of capital: 10%

Useful life of the machine: 7 years

Salvage value of the machine after 7 years: $120.

Although the guillotine will save time, the only tangible cost savings will be about $180 per year. The analysis shows a negative net present value.

I need help calculating the net present value of the guillotine. What is the NPV?

Ramsey believes the machine will produce the intangible benefit of greater customer satisfaction. How much per year must Ramsey be willing to pay for this benefit?