1 Stirling Windows Inc. is considering purchasing an automated cutting machine for use in the production of its sind dass window. ww replace the current cutting machine which will be sold. The new machine will require a major overhaul at the end of the shiuth year and will be disposed of at the end of its ten year useful life. Below is the information management has on the new cutting machine and the old cutting machine: 2 . Cost of the machine Installation and software costs Annual reduction in labour costs Annual reduction in material costs Increase in monthly maintenance costs Cost of overhaul Salvage value of the new machine Salvage value of the old machine Required rate of return $950,000 $700,000 $290,000 $93,000 $5,260 $93,000 $200,000 $85,000 18% PV Factor 1/((1+x+y) Piratenper,pmi, IM.ltype) IRR(arrayvals,estimate) IRR(arrayals) -PMT(rate, nperpval, [vall.type) Required: Compute the net annual cost savings promised by the new cutting machine. (1 mark) Annual reduction in labour costs $290,000 Annual reduction in material costs $93,000 Increase in maintenance costs $5,260 Net annual cost savings $377,740 Using the answer from part 1 and the other data provided, calculate the net present value of the new machine. (11 marks) Ignore ncome taxes Present value ofthaca 13 Increase in maintenance costs Net annual cost savings 3372 74 20 2. Using the answer from part 1 and the other data provided, calculate the net present value of the new machine. (11 marks grore Income taxes 22 Present value 23 Amount of the of the cash Item Year(s) cash flows flows 24 Now 25 Now 1-10 7 6 3 10 . 3. Assume that management can identify several intangible benefits associated with the new machine. What dollar value per year would management have to attach to these intangible benefits in order to make the new cutting machine an acceptable investment? (1 mark) Intangible benefits per year Will the Internal rate of return be higher or lower than the required rate of return?. (1 mark)