Chapter 12 Homework A Saved Wendell's Donut Shoppe is investigating the purchase of a new $39,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,400 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. 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 $11,780 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 value 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.) Hint Print References 1. Annual cash inflows 2. Discount factor 3. Internal rate of return 4. Internal rate of return EXHIBIT 12B-1 Present Value of $1; 3 4 5 6 789 Periods 4% 5% 6% 7% 8% 9% 10% 1% 12% 3% 4% 5% 16% 7% 18% 9% 20% 21% 22% 23% 24% 25% 0962 0952 0943 0935 0926 0.97 0909 0.901 0893 0885 087 0870 0.862 0855 0847 0840 0.833 0826 0820 0.813 0806 0800 10.925 0907 0.890 0.873 0857 0.842 0.826 0812 0797 0.783 0769 0756 0.743 0731 0718 0706 0694 0683 0.672 0661 0650 0640 0.889 0864 0.840 0.86 0794 072 0751 0731 0712 0693 0675 0658 0641 0624 0609 0.593 0.579 0.564 0.551 0.537 0.524 0512 0.855 0.823 0792 0763 0735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 0822 0.784 0747 0713 0681 0650 0621 0593 0.567 0.543 0519 0497 0476 0.456 0437 0.419 0402 0.386 0370 0.355 0341 0328 6 0790 0746 0705 0.666 0630 0596 0564 0535 0507 0480 0456 0432 0410 0.390 0.370 0352 0335 0319 0303 0289 0275 0262 0.760 0.71 0665 0623 0.583 0.547 0.513 0482 0452 0425 0400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 10.731 067 0627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0191 0179 0168 0703 0645 0592 0544 0500 0460 0424 0391 0361 0333 0308 0284 0263 0243 0225 0.209 0194 0180 0167 0155 0144 0134 10 0.676 0614 0.558 0508 0.463 0422 0.386 0352 0322 0295 0.270 0.247 0.227 0208 0191 0.176 0162 0.149 0.137 0126 0116 0107 | 11 0.650 0.585 0527 0475 0429 0.388 0.350 037 0.287 0261 0.237 0.25 0195 0.178 0162 0148 0135 0123 0.112 0103 0094 0.086 10.625 0557 0.497 0.444 0397 0.356 0.319 0.286 0.257 0.231 0.208 0187 0.168 0152 0137 0124 0112 0102 0.092 0.083 0.076 0069 0601 0530 0469 045 0368 0326 0290 0258 0229 0204 0182 0163 0145 0130 0116 0104 0.093 0.084 0.075 0.068 0.061 0.055 0577 0505 0442 0.388 0340 0.299 0.263 0.232 0.205 0.181 0160 0.141 0.125 0111 0.099 0088 0078 0069 0062 0055 0049 0044 10.555 0481 0417 0362 0.315 0275 0239 0.209 0183 0160 0140 0123 0108 0.095 0.084 0.074 0.065 0057 0.051 0.045 0.040 0.035 0.534 0458 0394 0339 0292 0252 0.218 0188 0163 0.141 0123 0107 0.093 0081 0071 0062 0054 0047 0042 0.036 0032 0028 0513 0436 0371 037 0.270 0231 0198 0170 0.146 0.125 0108 0093 0080 0069 0.060 0.052 0045 0039 0.034 0030 0026 0.023 8 | 0494 0416 0.350 0.296 0.250 0212 0180 0.153 0130 011 0095 0.081 0.069 0059 0.051 0.044 0038 0032 0028 0024 0.021 0018 9 0475 0396 0331 027 0232 0194 0164 0138 0116 0098 0083 0070 0060 0051 0043 0.037 0.031 0.027 0.023 0.020 0.07 0.014 20 0.456 0.377 0312 0.258 0.215 0178 0149 0.124 0104 0.087 0.073 0.061 0051 0043 0.037 0031 0.026 0.022 0.019 0.016 0.04 0.012 21 0439 0.359 0294 0.242 0199 0164 0135 0112 0.093 007 0.064 0.053 0044 0.037 0.031 0026 0022 0.018 0015 0.03 0.01 0.009 22 0422 0342 0278 0226 0184 0150 0123 0101 0083 0068 0056 0046 0038 0032 0026 0.022 0018 0015 0.013 001 0009 0.007 23 0.406 0.326 0.262 0.211 0170 0138 0112 0.091 0074 0.060 0049 0.040 0033 0.027 0022 0018 005 0.02 0010 0009 0007 0.006 0390 0310 0247 0197 0158 0126 0102 0082 0066 0.053 0043 0035 0028 0023 0019 0.05 0.013 0.010 0.008 0.007 0.006 0.005 25 0375 0.295 0233 0184 0146 016 0.092 0074 0.059 0.047 0.038 0.030 0.024 0.020 0016 0.03 0.010 0.009 0.007 0.006 0.005 0.004 26 0361 0281 0220 0172 035 0106 0084 0.066 0.053 0042 0.033 0.026 0021 0.07 0.04 0.01 0009 0.007 0.006 0.005 0.004 0.003 27 0.347 0.268 0.207 0161 0125 0.098 0076 0.060 0.047 0037 0.029 0.023 0018 0.04 001 0.009 0.007 0.006 0.005 0.004 0.003 0.002 28 0333 0.255 0196 0150 0116 0.090 0.069 0054 0.042 0.033 0.026 0.020 0.06 0.012 0010 0.008 0.006 0005 0.004 0.003 0002 0.002 10.321 0.243 0185 0141 0107 0082 0063 0048 0037 0029 0022 007 004 001 0008 0006 0.005 0.004 0003 0.002 0.002 0002 30 0308 0.231 0174 0131 0.099 0.075 0.057 0044 0.033 0.026 0020 0.05 0.012 0.009 0007 0.005 0.004 0.003 0.003 0.002 0002 0.001 40 0.208 0142 0.097 0067 0046 0.032 0.022 005 0.01 0.008 0.005 0.004 0.003 0.002 0001 0.001 0.001 0000 0.000 0.000 0.000 0.000 29 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arre Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1.886 1.859 1.833 1.808 1.783 1.759 1736 1713 1.690 1.668 1.647 1626 1.605 1585 1.566 1.547 1528 1.509 1.492 1.474 1457 1.440 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2210 2.174 2.140 2.106 2.074 2042 2.011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 5 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.1993.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7.499 71396.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 9.385 8.863 8.384 7.943 7.536 7.1616.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7487 7103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 10.563 9.899 9.295 8.745 8.244 7.786 7367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 22 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.8239.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 16 23