Henries Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $126,175, including freight and installation. Henries has estimated that the new machine would increase the companys cash inflows, net of expenses, by $35,000 per year. The machine would have a five-year useful life and no salvage value.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

Required:

1.

Compute the machines internal rate of return to the nearest whole percent.

Internal Rate of Return
Choose Numerator:	/	Choose Denominator:	=	Factor	Number of Years	Internal Rate of Return
Investment required	/	Annual net cash inflow	=	Factor
	/		=				%

2.

Compute the machines net present value. Use a discount rate of 12%. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

	Now	1	2	3	4	5
Purchase of machine
Annual cash inflows
Total cash flows
Discount factor (12%)
Present value
Net present value

3.

Suppose that the new machine would increase the companys annual cash inflows, net of expenses, by only $32,435 per year. Under these conditions, the internal rate of return to the nearest whole percent.

Internal Rate of Return
Choose Numerator:	/	Choose Denominator:	=	Factor	Number of Years	Internal Rate of Return
Investment required	/	Annual net cash inflow	=	Factor
	/		=				%