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 $34,390 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 % 13. Internal rate of return % EXHIBIT 12B-1 Present Value of $1; 1 ( 1+r)n Periods 5% 4% 1 0.962 6% 0.952 0.943 7% 8% 9% 10% 11% 12% 0.926 0.935 0.917 0.909 0.901 0.893 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 5 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 6 0.790 0.746 0.705 0.666 7 8 9 0.623 0.665 0.627 0.582 0.544 0.630 0.596 0.583 0.564 0.547 0.513 0.540 0.502 0.467 0.500 0.460 0.424 10 0.422 0.386 11 0.350 12 0.625 0.557 0.497 0.444 13 0.601 0.530 0.469 0.415 14 0.577 0.505 0.442 0.388 15 0.555 0.481 0.417 0.362 16 0.534 0.458 0.394 0.339 17 18 19 20 21 22 23 24 25 26 0.361 0.281 0.220 0.172 27 0.347 0.268 0.207 0.161 28 0.333 0.255 0.196 0.150 29 0.321 0.243 0.185 0.141 0.116 0.090 0.069 0.107 0.063 0.082 30 0.308 0.231 0.174 0.131 0.099 0.075 0.057 40 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.760 0.711 0.677 0.731 0.703 0.645 0.592 0.508 0.463 0.614 0.558 0.676 0.287 0.317 0.388 0.650 0.585 0.527 0.475 0.429 0.257 0.286 0.356 0.319 0.397 0.290 0.229 0.258 0.368 0.326 0.205 0.232 0.263 0.340 0.299 0.183 0.209 0.239 0.275 0.315 0.163 0.188 0.218 0.252 0.292 0.146 0.170 0.270 0.231 0.198 0.513 0.436 0.371 0.317 0.130 0.153 0.212 0.180 0.494 0.416 0.350 0.250 0.296 0.116 0.164 0.138 0.194 0.475 0.396 0.331 0.277 0.232 0.087 0.124 0.104 0.178 0.149 0.456 0.312 0.377 0.258 0.215 0.093 0.077 0.112 0.135 0.164 0.439 0.359 0.294 0.199 0.242 0.101 0.083 0.150 0.123 0.422 0.278 0.184 0.342 0.226 0.060 0.049 0.074 0.091 0.138 0.112 0.406 0.326 0.262 0.211 0.170 0.035 0.043 0.066 0.053 0.082 0.102 0.126 0.390 0.310 0.247 0.197 0.158 0.030 0.038 0.074 0.059 0.047 0.116 0.092 0.375 0.295 0.233 0.146 0.184 0.021 0.026 0.033 0.042 0.053 0.066 0.084 0.106 0.135 0.018 0.023 0.029 0.037 0.047 0.060 0.076 0.098 0.125 0.026 0.033 0.054 0.042 0.022 0.037 0.029 0.048 0.033 0.026 0.011 0.008 0.613 0.592 0.543 0.519 0.456 0.432 0.535 0.507 0.480 0.452 0.425 0.400 0.482 13% 14% 15% 0.885 0.870 0.877 0.797 0.783 0.769 0.756 0.658 0.693 0.675 0.572 0.497 0.410 0.390 0.376 0.434 0.404 0.376 0.351 0.327 0.391 0.361 0.333 0.308 0.284 0.352 0.322 0.084 0.074 0.071 0.062 0.069 0.060 0.303 0.249 0.263 0.279 0.296 0.314 0.354 0.333 0.204 0.218 0.191 0.233 0.266 0.249 0.305 0.285 0.167 0.155 0.194 0.180 0.209 0.225 0.243 0.263 0.137 0.126 0.116 0.149 0.176 0.162 0.227 0.208 0.191 0.270 0.247 0.295 0.123 0.112 0.162 0.135 0.148 0.195 0.178 0.215 0.261 0.237 0.102 0.092 0.124 0.112 0.137 0.152 0.168 0.208 0.187 0.231 0.084 0.093 0.130 0.116 0.104 0.145 0.163 0.182 0.204 0.069 0.099 0.088 0.141 0.111 0.125 0.181 0.160 0.108 0.095 0.123 0.140 0.160 0.093 0.081 0.107 0.141 0.123 0.093 0.080 0.125 0.108 21% 22% 23% 24% 25% 20% 19% 17% 16% 18% 0.800 0.806 0.813 0.820 0.826 0.833 0.840 0.847 0.862 0.855 0.640 0.661 0.683 0.672 0.650 0.694 0.706 0.718 0.743 0.731 0.524 0.512 0.551 0.537 0.579 0.564 0.609 0.593 0.624 0.641 0.423 0.410 0.467 0.482 0.499 0.516 0.534 0.552 0.386 0.402 0.437 0.419 0.456 0.476 0.319 0.352 0.335 0.370 0.451 0.370 0.437 0.341 0.355 0.328 0.289 0.275 0.262 0.235 0.222 0.210 0.179 0.168 0.144 0.134 0.107 0.094 0.103 0.086 0.076 0.083 0.075 0.068 0.061 0.069 0.055 0.078 0.062 0.055 0.049 0.044 0.065 0.057 0.051 0.045 0.040 0.035 0.054 0.047 0.042 0.036 0.032 0.028 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.111 0.069 0.081 0.095 0.060 0.070 0.083 0.098 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.040 0.033 0.027 0.022 0.018 0.019 0.028 0.023 0.015 0.013 0.010 0.008 0.024 0.020 0.016 0.013 0.009 0.010 0.014 0.011 0.017 0.015 0.012 0.010 0.009 0.007 0.006 0.007 0.006 0.005 0.007 0.006 0.005 0.004 0.009 0.007 0.006 0.005 0.004 0.003 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.020 0.016 0.012 0.010 0.008 0.017 0.014 0.011 0.008 0.006 0.005 0.044 0.015 0.020 0.012 0.009 0.007 0.005 0.004. 0.015 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.006 0.005 0.004 0.003 0.003 0.003 0.000 0.004 0.003 0.002 0.002 0.002 0.002 0.002 0.002 0.000 0.002 0.001 0.000 0.000 4005 Dain and snow EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears; 1/r(1-(1/(1+r)^n)) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 13% 0.901 0.893 0.885 14% 15% 0.877 0.870 2 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690. 1.668 1.647 1.626 1.605 3 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 4 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 5 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 3.199 18% 17% 16% 0.847 0.862 0.855 1.566 1.585 2.174 2.210 2.690 3.127 6 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 7 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 3.410 3.706 3.605 3.167 19% 20% 22% 21% 23% 24% 25% 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2.106 2.140 2.074 2.042 2.011 1.981 1.952 2.639 2.589 2.540 2.494 2.448 2.404 2.362 3.058 2.991 2.926 2.745 2.689 3.245 3.326 2.864 2.803 3.092 3.020 2.951 3.508 3.416 3.327 3.242 3.161 8 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 9 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 4.968 5.328 4.799 4.639 4.487 4.344 4.207 4.078 5.132 4.946 4.772 4.607 4.451 4.303 3.837 3.954 4.163 4.031 10 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 11 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.650 5.426 5.687 5.938 5.216 5.019 4.833 4.659 4.494 5.453 5.234 5.029 4.836 4.486 4.656 4.339 4.192 4.327 3.726 3.518 3.619 3.905 3.786 3.673 3.923 3.799 4.054 4.035 4.177 3.902 3.776 3.421 3.329 3.566 3.463 3.682 3.571 3.656 12 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 5.918 6.194 5.660 5.197 5.421 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 13 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 14 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 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 15 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 6.974 7.379 6.265 5.954 5.668 5.405 17 12.166 11.274 10.477 9.763 9.122 8.544 8.022 18 12.659 11.690 10.828 10.059 9.372 8.756 19 13.134 12.085 11.158 10.336 9.604 20 21 13.590 12.462 11.470 10.594 9.818 14.029 12.821 11.764 10.836 10.017 22 14.451 13.163 12.042 11.061 10.201 9.442 23 14.857 13.489 12.303 11.272 10.371 9.580 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 9.823 9.077 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.422 8.488 8.548 28 29 16.663 14.898 13.406 12.137 11.051 10.116 9.307 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.602 8.650 30 40 17.292 15.372 13.765 12.409 11.258 10.274 9.427 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.694 8.951 6.604 6.729 6.373 5.749 6.047 5.475 5.222 7.120 4.775 7.549 7.702 7.250 6.840 6.467 6.128 8.201 5.818 5.534 5.273 5.033 4.608 4.812 7.839 7.366 6.938 8.950 8.365 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 7.025 9.129 8.514 7.963 7.469 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 8.649 8.075 7.562 7.102 6.312 6.687 5.973 5.665 5.384 5.127 4.891 4.675 4.476 9.292 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 8.266 8.883 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979. 4.746 4.534 4.339 4.160 3.995 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 4.990 4.576 4.391 4.219 4.059 3.910 4.419 4.263 4.442 4.243 4.080 3.928 4.097 3.942 4.279 4.110 3.954 4.292 4.121 3.963 4.302 4.488 4.499 4.311 4.507 4.318 4.143 3.981 4.323 4.147 4.514 3.985 4.130 3.970 4.137 3.976