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Question: a company is considering whether to buy a new machine...

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A company is considering whether to buy a new machine, which costs $97,000. The cash flows (adjusted for taxes and depreciation) that would be generated by the new machine are given in the following table: Year Cash flow$50, 000 $40, 000 5,000 $20, 000 (a) Find the total present value of the cash flows. Treat each years cash flow as a lump sum at the end of the year and use an interest rate of 12.5% per year, compounded annually. Year Payment Present Value 1 $50,000 Number 2 $40,000 Number 3 $25,000 Number 4 $20,000 Number TOTALNumber b) Based on a comparison of the cost of the machine and the present value of the cash flows, would you recommend purchasing the machine?

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