1.)

A. Net present value (NPV)

The net present value method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows back to the present point in time using the required rate of return.

B. Payback period

The payback method measures the time it will take to recoup, in the form of expected future cash flows, the net initial investment in a project. Payback (also called payback period) measures how quickly managers expect to recover their investment dollars. The shorter the payback period, the more attractive the asset, all else being equal. Go ahead and calculate the payback period for the new machine. (Round your answer to two decimal places.)

C. Discounted payback period

The discounted payback method calculates the amount of time required for the discounted expected future cash flows to recoup the net initial investment in a project. The shorter the discounted payback period, the more attractive the asset, all else being equal.

D. Internal rate of return

The internal rate-of-return method calculates the discount rate at which an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.

E. Accrual accounting rate of return based on net initial investment (assume straight-line depreciation)

2. LAST ANSWER ALL

E21-22 (similar to) Question Help Divine Candy Company is considering purchasing a second chocolate dipping machine in order to expand their business. The information Divine has accumulated regarding the new machine is EEB (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements Requirement 1. Calculate the following for the new machine a. Net present value (NPV) (Use factors to three decimal places, X.XXX, and use value of the investment rounded to the nearest whole dollar.) minus sign or parentheses for a negative net present value. Enter the net present The net present value is $ Data Table Cost of the machine $160,000 Increased contribution margin $24,000 Life of the machine 10 years 4% Required rate of return Divine estimates they will be able to produce more candy using the second machine and thus increase their annual contribution margin. They also estimate there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers. Assume all cash flows oCcur at year-end except for initial investment amounts Print Done - X Requirements 1. Calculate the following for the new machine: Net present value Payback period Discounted payback period . b. c. d. Internal rate of return (using the interpolation method) Accrual accounting rate of return based on net initial investment (assume straight-line depreciation) e. 2. What other factors should Divine Candy consider in deciding whether to purchase the new machine? Print Done E21-22 (similar to) Question Help Divine Candy Company is considering purchasing a second chocolate dipping machine in order to expand their business. The information Divine has accumulated regarding the new machine is EEB (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements Requirement 1. Calculate the following for the new machine a. Net present value (NPV) (Use factors to three decimal places, X.XXX, and use value of the investment rounded to the nearest whole dollar.) minus sign or parentheses for a negative net present value. Enter the net present The net present value is $ Data Table Cost of the machine $160,000 Increased contribution margin $24,000 Life of the machine 10 years 4% Required rate of return Divine estimates they will be able to produce more candy using the second machine and thus increase their annual contribution margin. They also estimate there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers. Assume all cash flows oCcur at year-end except for initial investment amounts Print Done - X Requirements 1. Calculate the following for the new machine: Net present value Payback period Discounted payback period . b. c. d. Internal rate of return (using the interpolation method) Accrual accounting rate of return based on net initial investment (assume straight-line depreciation) e. 2. What other factors should Divine Candy consider in deciding whether to purchase the new machine? Print Done