Exercise 14-3 (Static) Internal Rate of Return (LO14-3] Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part- time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting machine for capital budgeting purposes? (Round your final answer to the nearest whole dollar amount.) 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 4. In addition to the data given previously, assume that the machine will have a $9,125 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 answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 1. Annual cash inflows 2. Discount factor 3. Internal rate of return % 4. Internal rate of return % EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; ((1+r))" Periods 1 2 3 4 le vl 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 2: 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. 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1. 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 2.210 2.174 2.1402 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 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. 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. 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 3,7063 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 3.9543 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.3285.1324.946 4.772 4.607 4.451 4.303 4.1634 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 4.3394 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.4864 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.4926.1945.918 5.660 5.421 5.197 4.9884.793 4.611 4. 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.1225.8425.583 5.342 5.1184.910 4.7154 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.2295.008 4.8024 11.118 10,380 9.712 9.108 8.559 8.061 7.606 | 7.1916.811 6.462 6.142 5.847 5.575 5.324 5.092 4.8764 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.3796.9746.604 6.265 5.954 5.668 5.405 5.1624.9384 12.166 11.274 10.477 9.763 9.122 8.544 8.022 7.5497.120 6.729 6.373 6,047 5.749 5.475 5.222 4.9904 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. 13.134 12.085 11.158 10.336 9.604 8.9508,365 7.8397.3666,938 6,5506.198 5.8775.584 5.316 5.070 4. 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4. 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.5627.102 6,687 6,312 5.973 5,665 5.384 5.1274, 14.451 13.163 12.042 11.061 10,201 9442 8.7728.176 7.645 7.170 6.743 6,359 6011 5.696 5.410 5,1494 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.1674 15.247 13.799 12.550 11.469 10.529 9.707 8,985 8.3487.7847.283 6.835 6,434 6,073 5.746 5.451 5.1824 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.8437.330 6.873 6.464 6.097 5.7665.467 5.1954 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 5.2064 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 5.2154 16.663 14.898 13.406 12.137 11.051 10.116 9,307 8.602 7.9847.441 6.961 6.534 6.152 5.810 5.502 5.2234 16.984 15.141 13.591 12.278 11.158 10.1989.370 8.650 8.0227.470 6,983 6.551 6.166 5.820 5.510 5.2294 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6,566 6.177 5.829 5.517 5.235 4. 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.2584 EXHIBIT 14B-1 Present Value of S1;