net present value methods and present value index diamond and turf inc, is considering And investment in one of two machines. The sewing machine will increase productivity from sewing 170 baseball per hour to sewing 306 per hour.
enowcontke ignment/takehssigamenater-asigmnt-akeL l eBook Calculator Print Itemm Net Present Value Method and Present Value Index Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 170 baseballs per hour to sewing 306 per hour. The contribution marg in per unit is $0.44 per baseball. Assume that any increased production of machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $22 per hour. 1,400 hours per year. The packing machine will cost $115,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return of 15% on its investments. The sewing machine will cost $349,000, have a 10-year life, and will operate for Present Value of an Annuity of $1 at Compound Interest Year 10% 12% 15% 20% 0.9430.909 0.893 0.870 0.833 1.8331.736 1.690 1.626 1528 3 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.0372.855 2.589 5 4.212 3.7913.605 3.353 2.991 4.917 4.3554.111 3.785 3.326 5.582 4.868 4.5644.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 .328 4.772 4.031 10 7.360 6.1455.650 5.019 4.192 696 7 9682 192 a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. Round to the nearest 2:08 PM a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. R ollar. Sewing Machine Packing Machine Present value of annual net cash flows Amount to be invested Net present value b. Determine the present value index for the two machines. If required, round your answers to two decimal places. 349,000115,300 Sewing Machine Packing Machine 1.20 Present value index c. If Diamond and Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade as correct.) Feedback Check My Work a. First determine the annual net cash flow for each machine. For the sewing machine, multiply the hours by the incremental baseballs by the contribution margin per basebal. For the packing machine, multiply the hours by the labor cost saved. Next, multiply the each machine by the present value of an annuity factor for 10 periods at 15%, Exhibit 5. Subtract the amount to be invested. b. Div ide the total present value of the net cash flow by the amount to be invested enowcontke ignment/takehssigamenater-asigmnt-akeL l eBook Calculator Print Itemm Net Present Value Method and Present Value Index Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 170 baseballs per hour to sewing 306 per hour. The contribution marg in per unit is $0.44 per baseball. Assume that any increased production of machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $22 per hour. 1,400 hours per year. The packing machine will cost $115,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return of 15% on its investments. The sewing machine will cost $349,000, have a 10-year life, and will operate for Present Value of an Annuity of $1 at Compound Interest Year 10% 12% 15% 20% 0.9430.909 0.893 0.870 0.833 1.8331.736 1.690 1.626 1528 3 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.0372.855 2.589 5 4.212 3.7913.605 3.353 2.991 4.917 4.3554.111 3.785 3.326 5.582 4.868 4.5644.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 .328 4.772 4.031 10 7.360 6.1455.650 5.019 4.192 696 7 9682 192 a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. Round to the nearest 2:08 PM a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. R ollar. Sewing Machine Packing Machine Present value of annual net cash flows Amount to be invested Net present value b. Determine the present value index for the two machines. If required, round your answers to two decimal places. 349,000115,300 Sewing Machine Packing Machine 1.20 Present value index c. If Diamond and Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade as correct.) Feedback Check My Work a. First determine the annual net cash flow for each machine. For the sewing machine, multiply the hours by the incremental baseballs by the contribution margin per basebal. For the packing machine, multiply the hours by the labor cost saved. Next, multiply the each machine by the present value of an annuity factor for 10 periods at 15%, Exhibit 5. Subtract the amount to be invested. b. Div ide the total present value of the net cash flow by the amount to be invested
