Problem:
The BCR Corporation is considering buying a new machine at a cost of $400,000. They expect to have an annual cost savings of $120,000 at the end of each year for five years. They expect to incur maintenance insurance costs of $15,000 at the time of purchase and $15,000 at the end of each year for the next four years. They expect to get $80,000 from selling the machine at the end of the fifth year. All of these revenues and costs are after tax, as is the corporation's cost of capital of 8%.
Required:
Question: Compute the net present value. Is this purchase financially justified?
Note: Provide correct solution of the given problem with step by step calculations.