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Monty Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $ 104,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $ 11,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $ 99,000. Martson Molders currently sells a molding machine that will allow Monty Pix to increase production and sales to 20,000 frames per year. The machine, which has a ten-year life, sells for $ 139,000 and would cost $ 13,000 per year to operate. Monty Pix's current machine costs only $ 8,000 per year to operate. If Monty Pix purchases the new machine, the old machine could be sold at its book value of $ 5,000. The new machine is expected to have a salvage value of $ 20,000 at the end of its ten-year life. Monty Pix uses straight-line depreciation.

a. Calculate the new machine's net present value assuming a 16% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

Net present value

$

b. Use Excel or a similar spreadsheet application to calculate the new machine's internal rate of return. (Round answer to 2 decimal places, e.g. 1.25%.)

Internal rate of return

enter the internal rate of return in percentages rounded to 1 decimal place %

c. Calculate the new machine's payback period. (Round answer to 2 decimal places, e.g. 1.25.)

Payback period

years rounded to 2 decimal places years

\fAPPENDIX 9.2 Present value of an annuity of $1 per period. Periods 5% 6% 7% 9% 10% 11% 12% 13 14% 16% 18% 20% 0,9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8621 0.8475 0.8333 1,8861 1,8594 1.8334 1.8080 1.7833 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6052 1.5656 1.5278 MAWNK 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4868 2.4437 2.4018 2.3612 2.3216 2.2459 2.1743 2.1065 3.6299 3.5460 3,4651 3.3872 3.3121 3.2397 3.1698 3.1024 3.0373 2.9745 2.9137 2.7982 2.6901 2.5857 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7907 3.6959 3.6048 3.5172 3.4331 3.2743 3.1272 2.9905 6 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.6847 3.4976 3.3255 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.0386 3.8115 3.6045 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.3436 4.0776 3.8372 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.6065 4.3030 4.0310 10 8.1109 7.7217 * 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 5,6502 5.4262 5.2161 4.8332 4.4941 4.1925 11 8.7605 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 6.2065 5.9377 5.6869 5.4527 5.0285 4.6560 4.3271 12 9.3851 8.8633 8.3838 7.9427 7.5361 7.1607 6.8137 6.4924 6.1944 5.9176 5.6603 5.1971 4.7932 4.4392 13 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 5.8424 5.3423 4.9095 45327 14 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862 7.3667 6.9819 6.6282 6.3025 6.0021 5.4675 5.0081 4.6105 5,0916 4.6755 15 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607 7.6061 7.1909 6.8109 6.4624 6.1422 5.5755 9.4466 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.6685 5.1624 4.7296 16 11.6523 10.8378 10.1059 6.7291 6.3729 5.7487 5.2223 4.7746 17 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5-488 7.1196 6.8399 6.4674 5.8178 5.2732 4.8122 18 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 7.2497 5.3162 4.8435 19 13.1339 120853 11.1581 10.3356 9.6036. 8.9501 8.3649 7.8393 7.3658 6.9380 6.5504 5.8775 12 4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 7.4694 7,0248 6.6231 5.9268 5.3527 4.5696 20 13.5903 $1 (1+ 1) PVARI=