Cabana Corporation manufactures furniture in several divisions, including the patio furniture division The manager of the patio furniture division plans to retire in two years. The manager receives a bonus based on the division's ROI, which is currently 10% One of the machines that the patio furniture division uses to manufacture the furniture is rather old and the manager must decide whether to replace it Click the icon to view information on the replacement decision) Read the requirements Requirement 1. Should Cabana Corporation replace the machine? Why or why not? Cabana would be better off if they did replace the machine its cost of capital and the IRR of the investment indicate that this is a positive net present value project Requirement 2. Assume that investment" is defined as average net long-term assets (that is, after depreciation) during the year Computo the project's ROI for each of its first five years. If the patio furniture manager is interested in maximizing his bonus, would he replace the machine before he retires? Why or why not? Bogin by computing the project's ROI for each of its first five years Select the formula to compute ROI, then enter the amounts for year 1 and calculate the project's ROI Then compute the Rol for the rest of the remaining years (Enter the Rol as a percent rounded to two decimal places, XXX%) ROI % Year 1 ment 1. Should Cabana Corporation replace the machine? Why or why not? stment voul hat * More Info - men eye iation) terested ng con for is a The new machine would cost $43,000 and would last 10 years. It would have no salvage value. The old machine is fully depreciated and has no trade-in value. Cabana uses straight-line depreciation for all assets. The new machine, being new and more efficient would save the company $7,000 per year in cash operating costs. The only difference between cash flow and net income is depreciation. The internal rate of return of the project is approximately 10%. Cabana Corporation's weighted average cost of capital is 7% Cabana is not subject to any income taxes In entert rs. (Ente Print Done ment 1. Should Cabana Corporation replace the machine? Why or why not? woul stmen - * Requirements that men Jiation teres ne ye cing 1. Should Cabana Corporation replace the machine? Why or why not? 2. Assume that "investment" is defined as average net long-term assets (that is after depreciation) during the year. Compute the project's ROI for each of its first five years. If the patio furniture manager is interested in maximizing his bonus would he replace the machine before he retires? Why or why not? 3. What can Cabana do to entice the manager to replace the machine before retiring? In ente rs (E y con s for as a Print Done