2 Wendell's Donut Shoppe is investigating the purchase of a new $52,100 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,100 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,800 dozen more donuts each year. The company realizes a contribution margin of $1.70 per dozen donuts sold. The new machine would have a six-year useful life 10 points Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. eBook Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answer to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $11,500 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present Hint Print rintvalue approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to nearest whole percentage.) References Annual cash linflowS 2. Discount factor Internal rate of return 4 Internal rate of return EXHIBIT 128-1 Present Value of $1; Periods 4% 6% 7% 8% 9% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0952 0943 0935 0926 0917 0909 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 0826 0820 0813 0806 0800 925 0907 0890 0873 0857 0842 0826 0812 0797 0783 0769 0756 0743 0731 0718 0706 0694 0683 0672 0661 0650 0640 3 0889 0864 0840 0.816 0794 0772 0751 0731 0712 0693 0675 0658 0641 0624 0609 0593 0579 0564 0551 0537 0524 0.512 4 0.855 0823 0792 0.763 0735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0.516 0499 0482 0467 0451 0437 0423 0.410 5 0.822 0784 0747 0713 0.681 0650 0621 0593 0567 0543 0519 0497 0.476 0456 0.437 0419 0402 0.386 0.370 0355 0.341 0.328 0.790 0746 0.705 0666 0630 0596 0564 0.535 0507 0480 0.456 0.432 0410 0.390 0.370 0352 0.335 0.319 0.303 0289 0.275 0.262 0760 0711 0665 0623 0583 0547 0513 0482 0452 0425 0400 0.376 0.354 0333 0.314 0296 0279 0.263 0249 0235 0222 0210 8 0731 0677 0627 0582 0540 0502 0467 0434 0404 0376 0351 0.327 0.305 0285 0266 0249 0233 0218 0204 0191 0179 0168 0703 0645 0592 0544 0500 0460 0424 0.391 0361 0333 0308 0284 0263 0 243 0225 0209 0194 0180 0167 0155 0144 0134 10 0676 0614 0558 0508 0463 0422 0.386 0.352 0 322 0295 0270 0247 0227 0208 0191 0176 0162 0149 0137 0126 0116 0107 11 0650 0585 0527 0.475 0429 0388 0.350 0.317 0287 0261 0237 0.215 0195 0178 0162 0148 0135 0123 0112 0103 0094 0.086 12 0625 0557 0.497 0.444 0.397 0356 0.319 0286 0257 0231 0208 0187 0168 0152 0137 0124 0.112 0102 0092 0083 0076 0069 0.415 0.368 0326 0.290 0258 0229 0204 0182 0163 0145 0130 0116 0104 0093 0084 0075 0068 0061 0 13 1 0530 4 0.577 0505 0442 0388 0340 0299 0263 0232 0205 0181 0160 0141 0125 0111 0099 0088 0078 0069 0062 0055 0049 0044 5 0555 048 0417 0.362 0315 0275 0239 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 0057 0051 0045 0040 0035 0.534 0458 0394 0339 0292 0252 0218 0188 0163 0141 0123 0107 0093 0081 0071 0062 0054 0047 0042 0036 0032 002 7 0513 0436 0371 0.317 0270 0231 0198 0170 0146 0125 0108 0093 0080 0069 0060 0052 0045 0039 0034 0030 0026 0023 18 0494 0416 0350 0296 0250 0212 0180 0153 0130 0111 0095 0081 0069 0059 0051 0044 0038 0032 0028 0024 0021 0018 9 0475 20 0456 0377 0312 0258 0 215 0178 0149 0124 0104 0087 0073 0061 0051 0043 0037 0031 0026 0022 0019 0016 0014 0012 21 0439 0359 0294 0242 0199 0164 0135 0112 0093 0077 0064 0053 0044 0037 0031 0026 0022 0018 0015 22 0422 0342 0278 0226 0184 0150 0123 0101 0083 0068 0056 0046 0038 0032 0026 0022 0018 0015 0013 0011 0009 0007 3 0406 0326 0262 0211 0170 0138 0112 0091 0074 0060 0049 0040 0033 0027 0022 0018 0015 0012 0010 0009 0007 0006 4 0.390 0310 0247 0197 0158 0126 0102 0082 0066 0053 0043 0035 0028 0023 0019 0015 0013 0010 0008 0007 0006 0005 5 0.375 0295 0233 0184 0146 0116 0092 0074 0059 0047 0038 0030 0024 0020 0016 0013 0010 0009 0007 0006 0005 0004 26 0361 0281 0220 0172 0135 0106 0084 0066 0053 0042 0033 0026 0021 0017 0014 0011 0009 0007 0006 0005 0004 0003 27 0347 0268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 0011 0009 0007 0006 0005 0004 0003 0002 28 0333 0255 0196 0150 0116 0090 0069 0054 0042 0033 0026 0020 0016 0012 0010 0008 0006 0005 0004 0003 0002 0002 9 0321 0243 0185 0141 0107 0082 0063 0048 0037 0029 0022 0017 0014 0011 0008 0006 0005 0004 0003 0002 0002 0002 0 0.308 0231 0174 0131 0099 0075 0057 0044 0033 0026 0020 0015 0012 0009 0007 0005 0004 0003 0003 0002 0002 0001 40 0208 0142 0097 0067 0046 0032 0022 0015 0011 0008 0005 0004 0003 0002 0001 0001 0001 0000 0000 0000 0000 0000 0.331 0277 0232 0194 0164 0138 0116 0098 0083 0070 0060 0051 0043 0037 0031 0027 0023 0020 0017 0014 EXHIBIT 128-2 Present Valu. ot an Annuity of SinArrears;h- ] Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% MS15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0962 0952 0943 0935 0926 0917 0909 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 0826 0820 0813 0806 0800 1859 1833 1.808 1783 1759 1736 1.713 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1492 1474 1457 1440 3 2775 2723 2673 2624 257 2531 2487 2444 2.402 2.361 2.322 2283 2246 2210 2174 2140 2106 2074 2042 2011 1981 1952 4 3630 3.546 3465 3.387 3312 3 240 3170 3102 3037 2.974 2.914 2855 2798 2743 2690 2639 2589 2540 2494 2448 2404 2.362 4.452 4.329 4212 4100 3993 3890 3791 3696 3605 3517 3.433 3352 3274 3199 3127 3058 2991 2926 2864 2803 2745 2689 6 5242 5.076 4.917 4767 4623 4486 4.355 4231 4111 3.998 3889 3.784 3685 3589 3498 3410 3.326 3245 3167 3092 3020 2.951 7 6.002 5.786 5.582 5389 5206 5033 4.868 4.712 4564 4.423 4288 4160 4.039 3922 3812 3.706 3605 3508 3416 3.327 3242 3161 6.733 6.463 6.210 5971 5747 5535 5335 5146 4968 4799 4639 4487 4.344 4207 4078 3954 3837 3726 3619 3518 3421 3.329 9 7435 7108 6.802 6515 6247 5995 5759 5.537 5.328 5132 4946 4772 4607 4.451 4303 4163 4031 3905 3786 3673 3.566 3463 10 8111 7722 7360 7024 6.710 6418 6145 5889 5.650 5.426 5216 5019 4833 4659 4494 4.339 4192 4054 3923 3799 3682 3.571 8.760 8 306 7887 7499 7139 6805 6495 6.207 5.938 5.687 5453 5.234 5029 4836 4656 4486 4.327 4177 4035 3.902 3776 3.656 12 9385 8.863 8384 7943 7536 7161 6 814 6492 6194 5918 5660 5421 5197 4988 4793 4611 4 439 4278 4127 3985 3851 3725 13 9.986 9394 8853 8358 7904 7487 7103 6750 6424 6122 5842 5583 5342 5118 4910 4.715 4.533 4.362 4203 4053 3.912 3.780 14 0563 9899 9.295 8745 8244 7786 7367 6982 6628 6.302 6002 5724 5468 5 229 5008 4802 4611 4.432 4265 4108 3962 3 824 5 11118 10.380 9.712 9.108 8559 8061 7606 7191 6.811 6.462 6.142 5847 5575 5324 5092 4.876 4675 4.489 4315 4153 4001 3.859 16 11652 10838 10106 9447 8851 8013 7824 7379 6974 6604 6.265 5954 5668 5405 5162 4938 4730 4536 4357 4189 4033 3887 17 12 166 11.274 10.477 9763 9122 8544 8022 7549 7120 6.729 6373 6047 5749 5475 5 222 4990 4775 4576 4.391 4219 4059 3910 18 12659 11.690 10.828 10059 9.372 8756 8201 7702 7250 6840 6.467 6128 5818 5534 5273 5.033 4812 4608 4419 4243 4080 3.928 19 13134 12 085 11158 10.336 9604 8950 8 365 7839 7366 6.938 6550 6198 5877 5584 5.316 5070 4843 4635 4442 4 263 4097 3942 20 13.590 12.462 11.470 10.594 9818 9129 8514 7963 7469 7025 6623 6259 5929 5628 5353 5.101 4870 4657 4460 4279 4110 3.954 21 14029 12821 11764 10836 10017 9292 8649 8075 7562 7102 6687 6312 5973 5665 5384 5127 4891 4675 4476 4292 4121 3963 22 14.451 13163 12.042 11061 10 201 9442 8772 8176 7645 7170 6743 6.359 6011 5696 5410 5.149 4909 4690 4488 4302 4130 3.970 23 4857 13489 12303 272 10371 9580 8883 8266 7718 7230 6792 6399 6044 5723 5432 5167 4925 4703 4499 4311 4137 3976 24 15.247 13 799 12.550 11469 10.529 9707 8985 8348 7784 7283 6.835 6.434 6073 5746 5451 5.182 4937 4713 4507 4318 4143 3.981 25 15622 14094 12.783 11654 10675 9823 9077 8422 7843 7330 6.873 6464 6097 5766 5467 5195 4.948 4721 4514 4323 4147 3.985 26 15983 14375 13003 11826 10810 9929 9161 8488 7896 7372 6906 6491 6118 5783 5480 5206 4956 4728 4520 4328 4151 3988 27 6330 14643 13211 987 10935 10027 9237 8548 7943 7409 6935 6514 6136 5798 5492 5215 4964 4734 4524 4332 4154 3990 28 6663 14898 13406 12137 11051 to116 9307 8602 7984 7441 6961 6534 6152 5810 5502 5223 4970 4739 4528 4335 4157 3992 29 16.984 15141 13.591 12 278 11158 10.198 9.370 8650 8022 7470 6983 6551 6166 5820 5.510 5229 4.975 4743 4531 4337 4159 3.994 30 17292 15.372 13765 12.409 11 258 10274 9427 8694 8055 7496 7003 6566 6177 5829 5517 5.235 4979 4746 4534 4339 4160 0 19.793 17159 15.046 13.332 11.925 10757 9779 8951 8.244 7634 7105 6.642 6233 5871 5548 5.258 4997 4760 4544 4347 4166 3.999 2 Wendell's Donut Shoppe is investigating the purchase of a new $52,100 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,100 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,800 dozen more donuts each year. The company realizes a contribution margin of $1.70 per dozen donuts sold. The new machine would have a six-year useful life 10 points Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. eBook Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answer to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $11,500 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present Hint Print rintvalue approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to nearest whole percentage.) References Annual cash linflowS 2. Discount factor Internal rate of return 4 Internal rate of return EXHIBIT 128-1 Present Value of $1; Periods 4% 6% 7% 8% 9% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0952 0943 0935 0926 0917 0909 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 0826 0820 0813 0806 0800 925 0907 0890 0873 0857 0842 0826 0812 0797 0783 0769 0756 0743 0731 0718 0706 0694 0683 0672 0661 0650 0640 3 0889 0864 0840 0.816 0794 0772 0751 0731 0712 0693 0675 0658 0641 0624 0609 0593 0579 0564 0551 0537 0524 0.512 4 0.855 0823 0792 0.763 0735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0.516 0499 0482 0467 0451 0437 0423 0.410 5 0.822 0784 0747 0713 0.681 0650 0621 0593 0567 0543 0519 0497 0.476 0456 0.437 0419 0402 0.386 0.370 0355 0.341 0.328 0.790 0746 0.705 0666 0630 0596 0564 0.535 0507 0480 0.456 0.432 0410 0.390 0.370 0352 0.335 0.319 0.303 0289 0.275 0.262 0760 0711 0665 0623 0583 0547 0513 0482 0452 0425 0400 0.376 0.354 0333 0.314 0296 0279 0.263 0249 0235 0222 0210 8 0731 0677 0627 0582 0540 0502 0467 0434 0404 0376 0351 0.327 0.305 0285 0266 0249 0233 0218 0204 0191 0179 0168 0703 0645 0592 0544 0500 0460 0424 0.391 0361 0333 0308 0284 0263 0 243 0225 0209 0194 0180 0167 0155 0144 0134 10 0676 0614 0558 0508 0463 0422 0.386 0.352 0 322 0295 0270 0247 0227 0208 0191 0176 0162 0149 0137 0126 0116 0107 11 0650 0585 0527 0.475 0429 0388 0.350 0.317 0287 0261 0237 0.215 0195 0178 0162 0148 0135 0123 0112 0103 0094 0.086 12 0625 0557 0.497 0.444 0.397 0356 0.319 0286 0257 0231 0208 0187 0168 0152 0137 0124 0.112 0102 0092 0083 0076 0069 0.415 0.368 0326 0.290 0258 0229 0204 0182 0163 0145 0130 0116 0104 0093 0084 0075 0068 0061 0 13 1 0530 4 0.577 0505 0442 0388 0340 0299 0263 0232 0205 0181 0160 0141 0125 0111 0099 0088 0078 0069 0062 0055 0049 0044 5 0555 048 0417 0.362 0315 0275 0239 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 0057 0051 0045 0040 0035 0.534 0458 0394 0339 0292 0252 0218 0188 0163 0141 0123 0107 0093 0081 0071 0062 0054 0047 0042 0036 0032 002 7 0513 0436 0371 0.317 0270 0231 0198 0170 0146 0125 0108 0093 0080 0069 0060 0052 0045 0039 0034 0030 0026 0023 18 0494 0416 0350 0296 0250 0212 0180 0153 0130 0111 0095 0081 0069 0059 0051 0044 0038 0032 0028 0024 0021 0018 9 0475 20 0456 0377 0312 0258 0 215 0178 0149 0124 0104 0087 0073 0061 0051 0043 0037 0031 0026 0022 0019 0016 0014 0012 21 0439 0359 0294 0242 0199 0164 0135 0112 0093 0077 0064 0053 0044 0037 0031 0026 0022 0018 0015 22 0422 0342 0278 0226 0184 0150 0123 0101 0083 0068 0056 0046 0038 0032 0026 0022 0018 0015 0013 0011 0009 0007 3 0406 0326 0262 0211 0170 0138 0112 0091 0074 0060 0049 0040 0033 0027 0022 0018 0015 0012 0010 0009 0007 0006 4 0.390 0310 0247 0197 0158 0126 0102 0082 0066 0053 0043 0035 0028 0023 0019 0015 0013 0010 0008 0007 0006 0005 5 0.375 0295 0233 0184 0146 0116 0092 0074 0059 0047 0038 0030 0024 0020 0016 0013 0010 0009 0007 0006 0005 0004 26 0361 0281 0220 0172 0135 0106 0084 0066 0053 0042 0033 0026 0021 0017 0014 0011 0009 0007 0006 0005 0004 0003 27 0347 0268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 0011 0009 0007 0006 0005 0004 0003 0002 28 0333 0255 0196 0150 0116 0090 0069 0054 0042 0033 0026 0020 0016 0012 0010 0008 0006 0005 0004 0003 0002 0002 9 0321 0243 0185 0141 0107 0082 0063 0048 0037 0029 0022 0017 0014 0011 0008 0006 0005 0004 0003 0002 0002 0002 0 0.308 0231 0174 0131 0099 0075 0057 0044 0033 0026 0020 0015 0012 0009 0007 0005 0004 0003 0003 0002 0002 0001 40 0208 0142 0097 0067 0046 0032 0022 0015 0011 0008 0005 0004 0003 0002 0001 0001 0001 0000 0000 0000 0000 0000 0.331 0277 0232 0194 0164 0138 0116 0098 0083 0070 0060 0051 0043 0037 0031 0027 0023 0020 0017 0014 EXHIBIT 128-2 Present Valu. ot an Annuity of SinArrears;h- ] Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% MS15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0962 0952 0943 0935 0926 0917 0909 0901 0893 0885 0877 0870 0862 0855 0847 0840 0833 0826 0820 0813 0806 0800 1859 1833 1.808 1783 1759 1736 1.713 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1492 1474 1457 1440 3 2775 2723 2673 2624 257 2531 2487 2444 2.402 2.361 2.322 2283 2246 2210 2174 2140 2106 2074 2042 2011 1981 1952 4 3630 3.546 3465 3.387 3312 3 240 3170 3102 3037 2.974 2.914 2855 2798 2743 2690 2639 2589 2540 2494 2448 2404 2.362 4.452 4.329 4212 4100 3993 3890 3791 3696 3605 3517 3.433 3352 3274 3199 3127 3058 2991 2926 2864 2803 2745 2689 6 5242 5.076 4.917 4767 4623 4486 4.355 4231 4111 3.998 3889 3.784 3685 3589 3498 3410 3.326 3245 3167 3092 3020 2.951 7 6.002 5.786 5.582 5389 5206 5033 4.868 4.712 4564 4.423 4288 4160 4.039 3922 3812 3.706 3605 3508 3416 3.327 3242 3161 6.733 6.463 6.210 5971 5747 5535 5335 5146 4968 4799 4639 4487 4.344 4207 4078 3954 3837 3726 3619 3518 3421 3.329 9 7435 7108 6.802 6515 6247 5995 5759 5.537 5.328 5132 4946 4772 4607 4.451 4303 4163 4031 3905 3786 3673 3.566 3463 10 8111 7722 7360 7024 6.710 6418 6145 5889 5.650 5.426 5216 5019 4833 4659 4494 4.339 4192 4054 3923 3799 3682 3.571 8.760 8 306 7887 7499 7139 6805 6495 6.207 5.938 5.687 5453 5.234 5029 4836 4656 4486 4.327 4177 4035 3.902 3776 3.656 12 9385 8.863 8384 7943 7536 7161 6 814 6492 6194 5918 5660 5421 5197 4988 4793 4611 4 439 4278 4127 3985 3851 3725 13 9.986 9394 8853 8358 7904 7487 7103 6750 6424 6122 5842 5583 5342 5118 4910 4.715 4.533 4.362 4203 4053 3.912 3.780 14 0563 9899 9.295 8745 8244 7786 7367 6982 6628 6.302 6002 5724 5468 5 229 5008 4802 4611 4.432 4265 4108 3962 3 824 5 11118 10.380 9.712 9.108 8559 8061 7606 7191 6.811 6.462 6.142 5847 5575 5324 5092 4.876 4675 4.489 4315 4153 4001 3.859 16 11652 10838 10106 9447 8851 8013 7824 7379 6974 6604 6.265 5954 5668 5405 5162 4938 4730 4536 4357 4189 4033 3887 17 12 166 11.274 10.477 9763 9122 8544 8022 7549 7120 6.729 6373 6047 5749 5475 5 222 4990 4775 4576 4.391 4219 4059 3910 18 12659 11.690 10.828 10059 9.372 8756 8201 7702 7250 6840 6.467 6128 5818 5534 5273 5.033 4812 4608 4419 4243 4080 3.928 19 13134 12 085 11158 10.336 9604 8950 8 365 7839 7366 6.938 6550 6198 5877 5584 5.316 5070 4843 4635 4442 4 263 4097 3942 20 13.590 12.462 11.470 10.594 9818 9129 8514 7963 7469 7025 6623 6259 5929 5628 5353 5.101 4870 4657 4460 4279 4110 3.954 21 14029 12821 11764 10836 10017 9292 8649 8075 7562 7102 6687 6312 5973 5665 5384 5127 4891 4675 4476 4292 4121 3963 22 14.451 13163 12.042 11061 10 201 9442 8772 8176 7645 7170 6743 6.359 6011 5696 5410 5.149 4909 4690 4488 4302 4130 3.970 23 4857 13489 12303 272 10371 9580 8883 8266 7718 7230 6792 6399 6044 5723 5432 5167 4925 4703 4499 4311 4137 3976 24 15.247 13 799 12.550 11469 10.529 9707 8985 8348 7784 7283 6.835 6.434 6073 5746 5451 5.182 4937 4713 4507 4318 4143 3.981 25 15622 14094 12.783 11654 10675 9823 9077 8422 7843 7330 6.873 6464 6097 5766 5467 5195 4.948 4721 4514 4323 4147 3.985 26 15983 14375 13003 11826 10810 9929 9161 8488 7896 7372 6906 6491 6118 5783 5480 5206 4956 4728 4520 4328 4151 3988 27 6330 14643 13211 987 10935 10027 9237 8548 7943 7409 6935 6514 6136 5798 5492 5215 4964 4734 4524 4332 4154 3990 28 6663 14898 13406 12137 11051 to116 9307 8602 7984 7441 6961 6534 6152 5810 5502 5223 4970 4739 4528 4335 4157 3992 29 16.984 15141 13.591 12 278 11158 10.198 9.370 8650 8022 7470 6983 6551 6166 5820 5.510 5229 4.975 4743 4531 4337 4159 3.994 30 17292 15.372 13765 12.409 11 258 10274 9427 8694 8055 7496 7003 6566 6177 5829 5517 5.235 4979 4746 4534 4339 4160 0 19.793 17159 15.046 13.332 11.925 10757 9779 8951 8.244 7634 7105 6.642 6233 5871 5548 5.258 4997 4760 4544 4347 4166 3.999