Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 1. Internal rate of return 2 Net present value $6 3. Internal rate of return % EXHIBIT 128-1 Present Value of $1, 1 (1+r) Periods 4% 596 1 0.962 0.952 2 0.925 0.907 3 + 5 0.822 0.784 0.747 6 0.790 0.746 0.705 7 0.760 8 0.731 9 0.703 10 0.676 11 12 0.625 0.557 13 14 0601 0.530 0377 0.505 15 0.555 0481 0417 0.232 0.205 0.181 0.200 0183 0.160 16 0.534 0.458 0.394 17 0.513 0.436 0371 18 0494 0416 0350 19 0475 0.396 0.331 20 0.456 0377 0312 21 0.439 0.359 0.294 22 0.422 0.342 0278 23 24 0.406 0.390 25 26 27 0.347 0060 0047 28 0.333 0.255 0.196 0.150 0.116 0.000 0069 0.054 0042 0.013 0.026 29 0.321 0.243 0.185 0.141 0.107 0.082 0.063 0.048 0.037 0029 0.022 30 0.308 0,231 0.174 0.131 0.099 0.075 0.057 0044 0.033 0.026 0.020 40 0208 0.142 0.097 0.067 0.046 0.012 0.022 0.015 0.011 0.008 0.005 6% 796 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.943 0935 0.926 | 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 0.890 0.873 0857 0.842 0.826 0812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.889 0.864 0840 0.816 0.794 0.772 0.751 0731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0437 0423 0410 0.713 0.681 0.650 0.621 0.393 0.567 0.543 0.519 0476 0456 0.437 0.419 0.402 0.386 0370 0355 0341 0328 0.666 0630 0.596 0.564 0.535 0.507 0480 0.456 0410 0390 0370 0.352 0.335 0319 0.303 0289 0.275 0262 0.711 0665 0.623 0.583 0.547 0513 0.482 0452 0425 0.400 0.376 0354 0333 0314 0.296 0.279 0263 0.249 0.235 0.222 0.210 0.677 0627 0.582 0540 0.502 0467 0434 0404 0.376 0.351 0.327 0.305 0285 0.266 0.249 0233) 0218 0.204 0.191 0179 0.168 0.645 0.592 0544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0243 0.225 0.209 0.194 0480 0.167 0.155 0.144 0.134 0.614 0.558 0.508 0.463 0.422 0.386 0352 0322 0.295 0.270 0247 0.227 0.208 0.191 0.176 0162 0149 0.137 0.126 0116 0.107 0.650 0.585 0.527 0475 0.429 0.388 0.350 0.317 0287 0.261 0237 0215 0.195 0178 0.162 0.148 0135 0123 0112 0.103 0.094 0.086 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0168 02 0137 0124 0112 0.102 0.092 0.083 0.076 0.069 0.469 0.415 0.368 0.326 0.290 0258 0229 0204 0.182 0.163 0.145 0.0 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.442 0.388 0.340 0.299 0.263 0.160 0141 0.125 0111 0.009 0.088 0.07% 0.069 0.062 0.055 0.049 0.044 0.362 0315 0.275 0239 0.140 0.123 0.108 0.095 0.054 0.074 0.065 0.057 0.051 0.045 0.040 0.015 0.339 0.292 0252 0.218 0.054 0.047 0.042 0.036 0.012 0.02% 0.317 0270 0231 0.198 0170 0146 0125 0.080 0.069 0.000 0.052 0045 0.039 0.034 0.030 0.026 0.023 0296 0250 0212 0180 0153 0130 0.111 0005 0081 0069 0.059 0.051 0.044 0.038 0.032 0.02% 0.024 0.021 0.018 0277 0.232 0.194 0.164 0138 0.116 0.095 0083 0070 0,060 0.051 0.043 0037 0.031 0.027 0.023 0020 0.017 0.014 0.258 0.215 0.178 0.149 0.124 0.104 0087 0.073 0.061 0.051 0.043 0.037 0031 0.026 0.022 0.019 0.016 0.014 0.012 0.242 0.199 0.164 0.135 0112 0.093 0.077 0064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.226 0.184 0.150 0.123 0.101 00K3 0.065 0.056 0.046 0.035 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.326 0.262 0.211 0.170 0138 0.112 0.091 0074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.197 0.158 0.126 0.102 0.310 0247 0082 0.066 0.053 0043 0.035 0.023 0.028 0.019 0.013 0.015 0.010 0.008 0.007 0.006 0.005 0375 0.295 0.233 0.184 0.146 0116 0092 0074 0059 0047 0038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.004 0.007 0.006 0.005 0.361 0.220 0.172 0.135 0106 0084 0066 0053 0.281 0.042 0033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.207 0.076 0.161 0.125 0098 0.029 0.023 0037 0.268 0.004 0.009 0.007 0.006 0.005 0.018 0.014 0.003 0.002 0.020 0.016 0.012 0010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.011 0.008 0.017 0.014) 0.006 0.004 0.003 0.002 0.002 0.002 0.015 0.012 0.009 0.003 0.007 0.005 0.003 0.004 0.003 0.002 0.000 0.000 0.001 0.001 0.572 0497 0.432 0.188 0163 0.141 0123 0.107 0.093 0.081 0.071 0.062 0.108 0.093 0.011 0.005 0.004 0.001 0002 0.002 0.001 0.000 0.000 0.000 EXHIBIT 128-2 Present Value of an Annuity of S1 in Arrears, 1/(1-(1/(1+r)')) Periods 4% 1 0.962 5% 6% 0.952 0.943 2 1.886 1859 1833 1:808 3 2.775 2.723 2.673 4 3.630 3.546 3.465 5 4452 4.329 4212 6 5.242 5.076 4917 7 6.002 5.786 5.582 5.206 8 5.733 6.463 6.210 5.971 5.747 5.535 5.335 9 7.435 7.108 6.802 6.515 6.247 5.995 5.759 10 8.111 11 12 9385 7.722 8.760 8.306 8863 13 9.986 14 10.563 9.899 9.295 7.360 7.024 7887 8.384 9.394 8.853 8.358 8.745 6.710 6418 6.145 5.216 7.499 7.139 7.536 6.805 6495 6 207 5.938 5.687 5.453 15 11.118 10 380 9.712 9.10% 16 11.652 10.838 10.106 9.447 7.161 7.943 7.904 7.487 8244 7.786 8.559 8.851 8313 6.492 6.814 6.194 5.918 5.660 54215.197 6.750 6424 6.122 7.103 5.842 7.367 6.982 6.628 6.302 6.002 5.724 8.061 7.606 7.191 6.811 6462 6142 5.847 7.824 7379 6974 6.604 6.265 5.954 17 12.166 11.274 10.477 9.763 9.122 8.544 8022 7.549 7.120 18 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7,702 7.250 6.840 19 13.134 12.085 11.158 10 336 9.604 8.950 8365 7539 7.366 20 13.590 12.462 11 470 10 594 9.518 9.129 8.514 7.963 6.938 7.469 7.025 6623 6:467 6.550 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7.102 6687 22 14.451 13.163 12.042 11.061 10 201 9.442 8722 8176 7.645 7.170 6.743 6.359 23 14.857 13.459 12.303 11.272 10 371 9 580 8883 8.266 24 15.247 13.799 12.550 11.469 10 529 9.707 8.985 8.348 25 15.622 14.094 12.783 11.654 10 675 9823 9.077 7,718 7.784 7.283 7.84) 7.230 26 15.983 14 375 13.003 11 826 10 810 9.929 9.161 8.488 7.896 27 16.330 14 643 13.211 11.987 10.935 10.027 9.237 8.548 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 29 30 40 4.675 4476 4.292 4.121 3.963 6.011 4.600 4.488 4.302 3970 4.499 4311 6044 4.703 6.792 6.399 6835 6434 6.073 5746 5451 5.182 4937 4.318 4.713 4.507 7.330 8.422 6.873 6464 6.097 5.766 5.467 5.195 4948 4323 4.721 4.514 7.372 6.906 6.491 6.118 5.206 5.783 5.480 4.728 4.520 4.328 7.409 7.943 6.514 6.136 5.798 5.492 5215 4964 6.935 4.734 4.524 6.961 6.534 8.602 7.984 7.441 6152 5.810 5.502 5.223 4.335 4.739 4.528 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5510 5.229 4.975 4.531 4.337 4.159 4.743 16.984 15.141 13.591 12.278 11.155 10.198 9.370 7.496 7.003 8.694 6.566 8.055 6.177 5.829 4.534 5.517 5.235 4.979) 4.339 4.160 4.746 17.292 15.372 13.765 12.409 11.258 10 274 9.427 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.800 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 0820 0.313 0.806 1.783 1.759 1.736 1.713 1.690 1:668 1.647 1.626 1.605 1.585 1566 1.547 1.528 | 1509 1492 1.474 1457 1440 2.624 2.577 2.531 2487 2.444 2.402 2361 2.322 2.283 2.246 2.210 2.174 2140 2.106 2.074 2.042 2011 1.981 1952 3.387 3.312 3.240 3:170 3.102 3.037 2.974 2362 2.914 2.855 2.798 2.743 2.690 2639 2.589 2.540 2.494 2.448 2.404 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2926 2.864 2.803 2.745 2.689 4.767 4.623 4.486 4.355 3.020 2.951 4.231 4.111 3.998 3.889 3.685 3.784 3.589 3.498 3.410 3.326 3.245 3.167 3.092 5.389 5.033 4.868 4.712 4.56 4.423 4.288 4160 4.039 3.922 3.812 3.508 3.605 3416 3.327 3.242 3.161 5.146 4.968 4.799 4.639 4487 4344 4.207 4078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 5.537 5.328 5.132 4.946 4.772 4607 3.566 3.463 4.451 4.303 4.163 4.031 3.905 3.786 3.673 5.889 5.650 5.426 4833 5019 4659 4494 4.339 4.192 4054 3.923 5.234 | 5.029 4.836 4.656 4486 4.327 4.177 4.035 4.988 4.793 4.611 4.439 4.278 4.127 3.985 5.583 5.342 5.118 4.053 4.910 4.715 4.533 4362 4.203 5.468 5.229 5.008 4.802 4432 4.265 4.108 3.962 4.611 5.575 5.324 5.092 4.876 4.675 | 4.489 4315 5.668 5.405 5.162 4938 4.730 4536 4.357 4.775 6.729 6373 6.047 5.749 5475 5.222 4.990 5.011 4.812 6.128 5.818 5.534 5.273 5.877 5.584 5316 5.070 4843 6.198 4.870 6.259 5.929 5.628 5.353 5.101 6312 5.973 5.665 5.384 4.891 5.127 5.696 5.410 5.149 4.909 5.725 5.432 5.167 4.925 3.706 3.799 3.682 3571 3.902 3.776 3.656 3.851 3.725 3.912 3.780 3.824 4.153 4.001 3859 4.189 4033 3.887 4.576 4.391 4219 4.059 3.910 4.608 4.419 4.243 4.080 3.928 4.442 4.635 4263 4.007 3.942 4657 4.460 4279 4.110 3.954 4.130 4.137 3.976 4.143 3.981 4.147 3.985 4.956 4.151 3.988 4.332 4.154 3.990 4.970 4.157 3.992 3.994 3.995