Capital budgeting methods, no income taxes.Yummy Candy Company is considering purchasing a second chocolate dipping machine in order to expand their business. The information Yummy has accumulated regarding the new machine is as follows:

Cost of the machine

$80,000

Increased annual cash flows

$15,000

Life of the machine

10 years

Required rate of return

6%

Yummy estimates they will be able to produce more candy using the second machine and thus increase their annual cash flows. 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.

Required:

1.Calculate the following for the new machine:

a.Net present value

b.Payback period

c.Discounted payback period

d.2.What other factors should Yummy Candy consider in deciding whether to purchase the new machine?