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 148-1 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 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 retum 4. Internal rate of retum % % WOCHT 1 Procent value of St Tier 55 7% 89 9% 10% 115 2 13 14 15 16% 18% 19% 20% 2n 1 0362 0.952 0.90 0.905 0.926 0.907 0909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.8400033 0326 002000306 000 2 0925 0.907 0890 0.873 0.857 0.842 0.826 0.812 0.797 07830769 0756 0743 0731 0.7180.708 0094 0683 0672 Obat 0650 0.540 3 0.899 0.364 0800916 0794 0772 0751 0731 0712 0.693 0.6750658 0.641 0.624 0.609 0.593 0.579 0564 0.551 05370524050 0.056 0.023 0.792 0.763 0.735 07080683 0659 0636 0.613 0.592 0.572 0.552 0.534 0516 0.499 0482 046704510231 0473 0.450 5 0822 0784 074707130681 0650 0621 0.593 0.567 0543 0.59 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.750 0.746 0.705 0.066 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.190 0.370 0.352 0.335 0.319 0.30 0.209 0275 0.242 1 076007 0.665 0623 0.583 0547 0.513 0.482 0.452 0425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0222 0.20 0.731 0.677 0.627 0.582 0.540 0.502 04670434 0404 0.376 0.351 0.327 0.305 0.285 0.266 0.2490.233 0.218 0.2040191 0179 0:16 0.703 06450502 0544 0.500 0.460 0424 0.391 0361 0.333 0.308 0284 0.263 0243 0225 0209 0.194 0180 0.167 0155 0114 0.134 10 0.675 064 0558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0247 0227 0.208 0191 0.176 0.162 0149 0.137 0.120 0.116 0.107 11 0650 0.505 0.527 0.475 0.429 0.388 0.350 0.3170287 0.261 0237 0.2150195 0.178 0162 0148 0.035 0123 0.112 0,103 0094 0.086 0525 0.557 0.4970444 0.3970356 0.319 0.286 0257 0.231 0.208 0.187 0168 0152 0137 0.124 0.112 0102 0.092 0.083 0.076 0.009 0.601 0.530 0.469 0.45 0.368 0326 0290 0.258 0229 0.2040182 0.163 0145 0.130 0.116 0.104 0.093 0.084 0.075 0.063 0.061 0055 14 0.577 0.505 0442 0.356 0340 0.299 0263 0232 0205 0.19 0360 01:41 0.125 0.11 0099 0.088 0078 0009 0.002 0.055 0049 0.04 15 0.556 0.481 0.47 0.362 0315 0275 0.22 0.209 0983 0160 0140 0123 0.08 0.095 0.084 0.074 0.065 0.057 0.051 0.04500400035 16 0.534 0.458 0394 0.339 0.292 0.252 0.218018801830.541 0123 0907 0.093 0.081 0.07 0.062 0.051 0.047 0.042 0.035 0.032 2028 17 059 036 0371 0317 0270 0.231 0198 017 0146 0125 0109 0093 0.080 0069 0.060 0,052 0.04 0.039 0034 0030 0.025 0.023 0.494 0.4160350 0.296 0.250 0.212 0.180 0153 0130 0.11 0.095 0.081 0009 0.059 0.051 0044 0.033 0032 0.028 0.024 0.021 0.018 10 0.05 0.106 0331 0277 0.232 0194 0164 0138 0116 0.098 0.03 0.070 0000 0.0510003 0.037 0001 0027 0023 0.020 0.017 0014 20 0.456 0377 0.312 0.258 0.2150178 014901240104 0.087 0.073 0.06 0.051 0.043 0.037 0.031 0.026 0022 0.0190098 004 0012 21 049 0350 0.294 0.2420:199 0164 0.135 0102 0.093 007 0064 0053 0.04 0.037 0001 0.026 0,022 0.010 0015 0,00 00 0.009 0422 0342 0.278 0220 0184 015001230.101 0.083 0.008 0.056 0.046 0.038 0,032 0.026 0022 0.01000100100011 0.009 0007 0406 0326 0202 0211 0.170 0108 0.112 0091 0074 0.000 0049 0040 0.035 0.027 0.022 0.01 0.015 0.00 0.00 0.00 0.00 0.000 0.190 0.310 0247 0.997 0156 0126 032 0.062 0006 0053 0043 0.035 0028 0.023 0.019 0.01 0.03 0.010 0000 0.00 0.006 0.005 0.375 0.205 0233 0104 0.146 0.116 0.052 0094 0059 0.047 0.038 0.030 0.024 0.025 0.0160.013 0010 0.000 0.007 0.005 0.005 0.004 26 0.361 0201 0.220 0172 0135 0.106 2004 0006 0.053 0042 003 0026 0.02 0.01 0.014 0.011 2009 0.007 2006 2005 2004 2003 03470268 0207 0.11 0125 0.098 0.025 0.000 0.047 0037 0.029 0.023 0.01 0.014 0.011 0000 0.00 0.00 0.00 0.00 0.00 0.002 28 0333 0.25% 01960.150 0110 0090 0000 0.054 0042 0.031 0.026 0,020 0,016 0,012 000 0000 0005 0.005 2004 2003 2002 2003 0.321 0.243 0.185 0101 0.107 0.002 0.063 0018 0.037 0.029 0.022 0.07 0.014 0.01 0.008 0.006 0.005 0.00 0.003 0.002 0000 0000 30 0.308 0.231 014 0:01 0.099 0.075 0.057 0044 0.033 0.025 0.020 0.05 0.012 0.009 0.007 0.005 0.004 0.000 0.000 0.00 0.00 0.001 20 0208 0342 0.097 0067 0.046 0.032 0.022 0.015 0:01 0.008 0.005 0.004 0003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 DOCHT 140-2 Present Value of an Annuity of $1 in Arreart: 5 6% 89 95 10% 115 12 13 145 152 16% 17 189 19% 20 215 225 235 25 1 09020952 0943 0935 0.926 0.917 0.909 0.901 0.093 0.885 0.877 0.870 0.862 0.855 0.8470840 0.833 0.826 0820 0.813 0805 0.800 1686 1859 1833 1808 1783 1750 1736 1713 1690 1668 1647 1626 1605 15851566 1547 1528 1509 1,492 1474 1457 440 1 2775 272 2.673 2624 2577 2531 2487 2444 2.402 2361 2.322 2283 2246 2210 2174 2140 2106 2074 2012 2011 1981 1952 3630 3546 2.465 3.387 3.312 32403170 3.102 3.037 2974 2.914 2855 2799 2.743 2690 26392589 2540 2494 2448 2404 2.362 5 4452 4329 4.212 4100 3.993 1890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3199 3127 3.058 2991 2926 2864 2.803 2745 2609 5.242 5.076 4917 4767 4623 4.486 4.355 4231 411 3998 3.889 3784 3685 3589 3,498 3.410 3326 3245 3157 3.092 3.020 2951 7 6.002 5786 5582 5.389 5206 5,033 4.968 4712 4.554 4.423 4.288 4160 4.039 3.922 3.812 3.706 3,605 3508 3.416 3327 3.2423.101 3 6733 6.463 6.210 5.971 5.747 5.535 5.335 5146 4.968 47994639 4497 43444207 4.078 3954 3.837 3.726 1619 35183421 3329 74357100 6.802 6,515 6,247 5.995 5.759 5.537 5.328 5.132 4.946 4772 4.607 4451 4303 4.163 4,031 3.905 3.786 3.673 3.566 3.463 10 8:11 7.722 7360 7.024 6710 6.418 6145 5.889 5650 5.426 5.216 5.019 4833 4659 4494 43394192 4054 3.923 3.799 3.682 3.571 8.764 8.300 7887 7499 7139 6.805 6.495 6.207 5938 5687 5.453 5234 502948364656 4 436 4327 4177 4.035 3.902 3.776 3.656 9385 8.8638.384 7.943 7536 7101 6.814 6492 6194 5918 5.060 5.421 5197 4.988 47934611 4.439 42784.127 3.985 3851 3725 10 9996 9,394 8.853 1358 7.904 7437 7102 6750 6.424 6.122 5.842 5.583 5342 5118 4.910 4715 4533 43624203 4053 3912 3730 10.563 9899 9.295 3745 8.244 7.786 7367 8.982 5.628 6302 6.002 5724 5468 5229 5.008 4802 4611 4432 4.265 41083.962 3.824 11118 10.300 9.712 9.100 8.550 8.061 2606 7191 6811 6462 6142 547 5.575 5324 5.092 4.876 4675 4.489 4.3154150 4001 3859 16 11652 10838 10100 9447 8.891 8.33 7824 7379 6974 6604 6265 5954 5668 5405 51624938 4730 4536 437 4189 4033 1887 17 12.66 11274 10.477 9.783 9.122 8544 8.022 754971206.729 6.373 6047 57495475 5222 4.990 4775 4.5754391 4219 40592910 10 12.850 1.000 10828 10.0599372 8.750 8.2012702 7.250 6.840 6.457 6128 5.818 5534 5.2735033 48124609 4.419 4243 4080 1928 10 1334 12065 11:58 10336 9604 8950 8.365 7839 2366 0938 65506198 5.877 5584 5346 5070 480 4635 4442 4.263 4097 2942 20 13590 12.462 11470 594 9129 8.514 7963 7469 2025 6.623 6259 5929 5.628 5353 5101 4320 4657 44604279410 21 14.029 12.521 1764 10536100179292 05498.075756271026687 6.312 5973 5665 5.334 5127 4891 4675 4.476 4292 4171 3.900 14.451 160 12.042 11001 10201 9442 87728.1767645 7170 6.743 6.359 6.011 5.696 540 5549 49094690 4.49 4.307 401970 14957 149 12.303 1127290.371 9500 8.883 3266 7710 7230 6792 6.399 6,044 5723 542 5167 24 407 4925 47034499 4311 1978 15 247 13 799125501146910529 9707 8.985 3.348 2754 7280 6.835 6434 6073 5700 5451 5182 4937470 450740 40 1981 15622 4094 12.783 1654 10,675 9.823 9077842273437330 6.87364646097 5766 5467 5195 4948 4721 454 4.323 4147 1905 20 1595 1003 1026 10 9929 9.161 848070962372 6906 64916150 22 5781 5.480 5206 4950 4728 4520 4320 4151 15.330 14643211 1967 10.905 1027 92371548 79437409. 6935 651636 5.790 5.492 5.215 49644734452 4312 454 1990 1666) 1.9 3400 1207 11.051 10190 9307160279847441 6901 6.534 0152 5.810 5.502 5.223 4.970 479 452042354152 16.90415141 12.501 12.278 11150 100 970 650 022 74706903 6551 6166 5.820 5.510 5.2294975473 4.531 43174159 11292 1512 1705 12.409 11.750 10.2749.427 304 3055 74967000 6.506 6177 5.529 5517523549794746 454 4379 4100 1995 40 1970 15.046 0332 1025 107579799510244 7634 21056642 623 55715545 52504747604544 437 400 2900