Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $485,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $2.95 million. The cost of the machine will decline by $315,000 per year until it reaches $1.375 million, where it will remain.

If your required return is 8 percent, should you purchase the machine?

If so, when should you purchase it?