Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $246,028. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7:

Year	1		$389,000
	2		399,000
	3		410,000
	4		425,000
	5		432,000
	6		434,500
	7		436,000

The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,000. This new equipment would require maintenance costs of $94,000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value.

Net present value

$enter the net present value in dollars rounded to 0 decimal places

Determine whether Hillsong should purchase the new machine to replace the existing machine?

select between Yes or No YesNo

10.

BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isnt equipped to do. Estimates regarding each machine are provided below.

		Machine A		Machine B
Original cost		$74,500		$183,000
Estimated life		8 years		8 years
Salvage value		0		0
Estimated annual cash inflows		$20,300		$40,200
Estimated annual cash outflows		$5,100		$9,810

Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

		Machine A		Machine B
Net present value		enter a dollar amount rounded to 0 decimal places		enter a dollar amount rounded to 0 decimal places
Profitability index		enter the Profitability index rounded to 2 decimal places		enter the Profitability index rounded to 2 decimal places

Which machine should be purchased?

select a machine that should be purchased Machine BMachine A should be purchased.

11. Bruno Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $437,000. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $103,297 for the next 6 years. Management requires a 10% rate of return on all new investments. Click here to view PV table. Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Internal rate of return

enter the internal rate of return in percentages rounded to 0 decimal places %

Should the investment be accepted?