Question - American Imaging products has considered the purchase of a new document imaging machine that can be used to produced professional quality promotional documents for its customers. The cost of the machine is $500,000. The company estimates that it will generate additional cash flows of $100,000 per year for the 15-year life of the machine. In addition, the company expects that the machine will have a $40,000 salvage value at the end of the asset's useful life.
The required rate of return on this investment is 15%
1. Calculate the Net Present Value of this machine.
2. Should the company purchase this imaging machine? Why?
Please provide step by step answer in Excel to show the formula and calculation.