McCall Corporation manufactures furniture in several divisions, including the patio

furniture division. The manager of the patio furniture division plans to retire in $2$

years. The manager receives a bonus based on the division's ROI, which is

currently $14\%.$

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

it$.$

i$.($Click the icon to view information on the replacement decision.$)$

Read the requirements.

Requirement $1.$ Should McCall Corporation replace the machine? Why or why not?

McCall would be better off if they

replace the machine. Its cost of capital and the IRR of the investment indicate that this is a positive net present value

project.

Requirement $2.$ Assume that "investment" is defined as average net long$-$term assets $($that is$,$ after depreciation$)$ during the year. Compute the project's ROI for each of

its first $5$ years. If the patio furniture manager is interested in maximizing his bonus, would he replace the machine before he retires? Why or why not?

Begin by computing the project's ROI for each of its first five years. Select the formula to compute ROI, then enter the amounts for year $1$ and calculate the project's ROI.

Then compute the ROI for the rest of the remaining years. $($Enter the ROI as a percent rounded to two decimal places, X$.$XX$\%)$