Your current company is considering buying a new welding machine, which costs $450,000, and the following cash inflow for the next 7 years: 20,000 (Year 1), 21,000 (Year 2), 30,000 (Year 3), 30,000 (Year 4), 35,000 (Year 5), 37,000 (Year 6), and 40,000 (Year 7). The discount rate is 10%.

Questions:

a. Compute the net present value (NPV) of this investment. (3 marks)

b. Should the software be purchased according to NPV analysis?