Suppose a firm is considering whether or not to buy a piece of machinery which it will use over the next four years.

The machine will cost 1,000 to purchase this year and will give rise to 200, 300, 300 and 400 in maintenance expenses in years 1, 2, 3 and 4 respectively.

The machine will generate revenues of 600, 800, 800 and 800 in years 1, 2, 3 and 4 respectively.

The scrap value of the machine will be 200 at the end of the year 4.

The required rate of return is 10%

Calculate the Net Present Value of this machine to the firm.

Should the firm purchase the machine based on this NPV?