currently done largely by hand. The machine the company is considering costs $63000. The manufacturer estimates that the machine would be usable for 12 years. but would require the replacement of several key parts at the end of the sixth year. These parts would cost $3400, including installation. After 12 years. the machine could be sold for about $3,250. 1 The Sweetwater Candy Company would like to buy a new machine that would automatically dip chocolates. The dipping operation is 10 The company estimates that the cost to operate the machine will be only $3,000 per year. The present method of dipping chocolates poms costs $14,000 per year. In addition to reducing costs, the new machine will increase production by 4,000 boxes of chocolates per year. The company realizes a contribution margin of $1.50 per box. A 20% rate of return is required on all investments. eBWK Click here to View Exhibit 10-1 and Exhibit 'lO-Z, to determine the appropriate discount factor(5) using tables. Film Required: 1. What are the net annual cash inows that will be provided by the new dipping machine? i Reta re nc es 2, Compute the new machine's net present value using the incremental cost approach. (Round discount futons) to 3 decimal places.) i \fEXHIBIT 10-2 Present Value of an Annuity of $1 Period 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 40% 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.714 2 1 886 1 859 1.833 1.783 1.736 1.690 1.647 1.605 1.566 1.528 1.492 1.457 1.424 1.392 1.361 1.224 3 2.77 2.723 2.673 2.577 2.487 2.402 2.322 2.246 2.174 2.106 2.042 1.981 1.923 1.868 1.816 1.589 3.630 3.546 465 3.312 3.170 3.037 2.914 2.798 2.690 9 2.494 2.404 2.320 2.241 2.166 1.879 5 4.452 4.330 4.212 3.993 3.791 3.605 3.433 3.274 4 3.127 2.991 2.864 2.745 2.635 2.532 2.436 2.035 6 5.24 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 3.167 3.020 2.885 2.759 2.643 2.168 5.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 3.416 3.242 3.083 2.937 2.802 2.263 S 5.733 6.463 6.210 5.747 5.335 4.968 4.639 4 4.344 4.078 3.837 3.619 3.421 3.241 3.076 2.925 2.331 9 7.435 7.108 6.802 6.247 5.759 5.328 4.946 4.607 4.303 4.031 3.786 3.566 3.366 3.184 3.019 2.379 10 8.111 722 7 360 6.710 6.145 5.650 6 4.833 4.494 4.192 3.923 3.662 3.465 3.269 3.092 2.414 11 S.760 8.306 7887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 4.035 3.776 3.544 3.335 3.147 2438 12 9.385 8.863 3.384 7.536 6.814 6.194 5.660 5.197 4.793 4.439 4.127 3.851 3.606 3.387 3.190 2.456 13 9.986 9.394 S.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4.203 3.912 3.656 3.427 3.223 2.468 14 10.56 9.899 9.295 8.24 6.628 6.002 5.468 5.008 4.6114 4.265 3.695 3.459 3.249 2.477 15 11.118 10.380 9.712 S.559 7.606 6.811 6.142 5.575 5.092 4.675 4.315 4.001 3.726 3.483 3.268 2.484 16 11.652 10.838 10.106 8.851 7.824 6.974 6.265 5.669 5.162 4.730 4.357 4.033 3.751 3.503 3.283 2 17 12.166 11.274 10.477 9.122 S.022 7.120 6.373 5.749 5.222 4.775 4.391 4.059 3.771 3.518 3.295 2.492 12.659 11.690 10.828 9.372 8.201 7.250 6.467 5.818 5.273 4.812 4.419 4.080 3.786 3.529 3.304 2.494 19 13.134 12.085 1.158 9.604 8.365 7.366 6.550 5.877 5.316 4.844 4.442 4.097 3.799 3.539 3.311 2.496 20 13.590 12.462 11.470 9.818 8.514 6.623 5.929 5.353 4.870 4.460 4.110 3.808 3.546 3.316 2.497 21 14.029 12.821 11.764 10.017 8.649 7.562 6.687 5.973 5.384 4 4.891 4.476 4.121 3.816 3.551 3.320 2.498 22 14.451 13.163 12.042 10.201 8.772 6.743 6.011 5.410 4.909 4.488 4.130 3.822 3.556 3.323 2.498 23 14.857 13.489 12.303 10.371 8.SS3 7.718 6.792 6.792 6.044 5.432 4.925 4.499 4.137 27 3.325 2.499 24 15.247 13.799 12.550 10.529 8.985 7.784 6.835 6.073 5.451 4.937 4.507 4.143 3.831 3.327 2.499 25 15.622 14.094 12.783 10.67 9.077 7.843 6.873 6.873 6.097 5.467 4.948 4.514 4.147 3.834 3.329 2.499 26 15.983 14.375 13.003 10.810 9.161 7.896 6.906 6.906 6.118 5.480 4.956 4.520 4.151 3.837 3.330 2. 27 16.330 14.643 13.211 10.935 9.237 7.943 6.935 6.935 6.136 5.492 4.964 4.525 4.154 3.839 3.331 2.500 28 16.663 14.898 13.406 11.051 9.307 46.961 6.961 6.152 5 2 4.970 4.528 4.157 3.840 3.331 2500 29 16.984 15.141 13.591 11.158 9.370 8.022 6.983 6.983 6.166 5.510 4.975 4.531 4.159 3.841 3.332 2.500 30 17.292 15.373 13.765 11.258 9.427 8.055 7.003 7.003 6 5.517 4.979 4.534 4.160 3.842 3.332 2.500 40 19.793 17.159 15.046 11.925 9.779 8.244 7.105 7.105 6.234 5.548 4.997 4.544 4.166 3.846 3.333 2.500