Patsy Folson is evaluating an opportunity for her small manufacturing company to acquire additional equipment from another company. This equipment will allow Patsy's company to produce a part internally which they are currently purchasing from an external vendor. Patsy estimates that the internal savings from manufacturing this part internally will be $75,000 per year. She also estimates this equipment has a 10 year useful life. The equipment also has no salvage value at the end of 10 years. Assume that the internally produced part is of the same quality as the one which is now purchased. The purchase price of the equipment is $400,000. Her company's cost of capital is 8%. Let PV represent present value. Should Patsy purchase the equipment? Patsy should Year Internal Savings PV of Internal Savings PV at 8% for each year 1 $75,000 0.926 2 $75,000 0.857 3 $75,000 0.794 4 $75,000 0.735 5 $75,000 0.681 6 $75,000 0.63 7 $75,000 0.583 8 $75,000 0.54 9 $75,000 0.5 10 $75,000 0.463 Total $750,000 Net of Initial Purchase Cost