Arnold Jones owns a carpentry shop and has the opportunity to purchase a new machine for $45,000. After carefully studying projected costs and revenues, Jones estimates that the new machine will produce a net cash flow of $10,800 annually and will last for seven years. Jones believes that an interest rate of 9 percent is adequate for his business.

Calculate the present value of the machine to Jones.

Does the purchase appear to be a smart business decision? Explain your answer.