BridgeportPix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $10,000overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells9,000frames per year, generating a total contribution margin of $93,000.

Martson Molders currently sells a molding machine that will allowBridgeportPix to increase production and sales to12,000frames per year. The machine, which has a ten-year life, sells for $133,000and would cost $14,000per year to operate.Bridgeport Pix's current machine costs only $8,000per year to operate. IfBridgeport Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $19,700at the end of its ten-year life.BridgeportPix uses straight-line depreciation.

a.Calculate the new machine's net present value assuming a14% discount rate.

b.Calculate the new machine's payback period.

c. Calculate the new machine's internal rate of return.