Stitches - R - Us is considering purchasing a sewing machine which will automate its processes. The company could sell more products; however, their old sewing machine cannot produce products fast enough. As a result, if the new sewing machine were purchased, sales would increase. The company has two purchase options: a brand-new machine or a refurbished machine. Details on each purchase is as follows (the brand-new machine is more efficient and can produce more units and therefore generate more inflows per year).

New Machine Refurbished Machine

Purchase of sewing machine

Salvage value at the end of 5 years

Additional net inflows for years 1-5

Repairs required at the end of year 4

Minimum required return on investments 14%

$70.000

$50.000

$15.000

$5.000

$16.000

$13,000

$4.000

14%