8Leefl Corporation manufactures furniture in several divisions, including the Patio Furniture divisiom The manager of the Patio Furniture division plans to retire in two years. The manager receives e bonus based on the division's ROI, which is currently 12%. One of the machines that the Patio Furniture division uses to manufacture the furniture is rather old, and the manager must decide whether to replace t The new machine would cost S38,000 and would last 10 year. It would have no selvage value. The old machine is fully depreciated and has no trade-in value Sleet uses straight-line depreciation for all assets. The new machine, being new and more efficient, would save the company S5,000 per year in cash operating costs. The only difference between cash flow and net Income is depreciation. The internal rate of return of the project is approximately 12%. Bleefl Corporation's weighted-average cost of capital is 5%. 81eefl is not subject to any income taxes Reguired Requirement 1. Should aleen Corporation replace the machine? Why or why not? 8Leefl would be better off f it the machine Its cost of capital and the IRR of the investment indicate that this is e net present value project Requirement 2. Assume that "investment' is defined as average net long-term assets after depreciatiom Compute the project's ROI for each year of Year 1 to Year 5 Ifthe Patio Furniture manager is interested in maximizing his bonus, would he replace the machine before he retires? Why or why not? Select the formula to compute ROI, and then enter the amounts for Year 1 and calculate the projects ROL Then compute the ROI for the rest of the remaining years. (Enter the ROI as a percent rounded to two decimal places, XXX%) Year 1 Year 2 Year 3 Year 4 Year 5 100 100 100 100 100 100 ROI Ifthe Patio Furniture manager is interested in maximizing his bonus, would he replace the machine before he retires? Why or why not? The manager went to replace the machine before retiring because the division is currently earning a return of 12%, and replacement ofthe machine will Requirement 3. What can Bleefl do to entice the manager to replace the machine before retiring? Bleefl could use long-term rather then short-term ROI, or use ROI and some other long-term measures to evaluate the Patio Furniture division to create goal congruence. Required O B. Replacing the machine would maximize the managers bonus, so 81eefl does not need to do anything extra to entice the manager Bleefl should give the manager e monetary bonus for replacing the machine in order to create goal congruence. Bleefl could use short-term rather then long-term ROI, or use ROI and some other short-term measures to evaluate the Patio Furniture division to create goal congruence 1. Should Bleefl Corporation replace the machine? Why or why not? 2. Assume that "investment' is defined as average net long-term assets after depreciation. Compute the projects ROI for each year of Year 1 to Year If the Patio Furniture manager is interested in maximizing his bonus, would he replace the machine before he retires? Why or why not? What can 81eefl do to entice the manager to replace the machine before retiring? print Done