Pronghorn Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $90,000 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 $12,000 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 $84,000. Martson Molders currently sells a molding machine that will allow Pronghorn Pix to increase production and sales to 20,000 frames per year. The machine, which has a ten-year life, sells for $125,000 and would cost $12,000 per year to operate. Pronghorn Pixs current machine costs only $8,000 per year to operate. If Pronghorn 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. Pronghorn Pix uses straight-line depreciation.

(A) Calculate the new machines net present value assuming a 16% discount rate.

(B) Use Excel or a similar spreadsheet application to calculate the new machines internal rate of return

(C) Calculate the new machines payback period.

APPENDIX 9.1 Present value of $1 received in n periods. Periods 4% 4 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 16% 18% 20% 1 2 3 4 5 5 0.9615 0.9524 0.9246 0.9070 0.8890 0.8638 0.8548 0.8227 0.8219 0.7835 0.9434 0.9346 0.9259 0.8900 0.8734 0.8573 0.8396 0.8163 0.7938 0.7921 0.7629 0.7350 0.7473 0.7130 0.6806 0.9174 0.9091 0.9009 0.8417 0.8264 0.8116 0.7722 0.7513 0.7312 0.7084 0.6830 0.6587 0.6499 0.6209 0.5935 0.8929 0.8850 0.7972 0.7831 0.7118 0.6931 0.6355 0.6133 0.5674 0.5428 0.8772 0.7695 0.6750 0.5921 0.5194 0.8621 0.8475 0.7432 0.7182 0.6407 0.6086 0.5523 0.5158 0.4761 0.4371 0.8333 0.6944 0.5787 0.4823 0.4019 6 7 8 9 10 0.7903 0.7462 0.7599 0.7107 0.7307 0.6768 0.7026 0.6446 0.6756 0.6139 0.7050 0.6663 0.6302 0.6651 0.6227 0.5835 0.6274 0.5820 0.5403 0.5919 0.5439 0.5002 0.5584 0.5083 0.4632 0.5963 0.5645 0.5346 0.5470 0.5132 0.4817 0.5019 0.4665 0.4339 0.4604 0.4241 0.3909 0.4224 0.3855 0.3522 0.5066 0.4803 0.4556 0.4523 0.4251 0.3996 0.4039 0.3762 0.3506 0.3606 0.3329 0.3075 0.3220 0.2946 0.2697 0.4104 0.3704 0.3538 0.3139 0.3050 0.2660 0.2630 0.2255 0.2267 0.1911 0.3349 0.2791 0.2326 0.1938 0.1615 11 12 13 14 15 0.6496 0.5847 0.6246 0.5568 0.6006 0.5303 0.5775 0.5051 0.5553 0.4810 0.5268 0.4970 0.4688 0.4423 0.4173 0.4751 0.4289 0.4440 0.3971 0.4150 0.3677 0.3878 0.3405 0.3624 0.3152 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.1954 0.1619 0.1346 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1685 0.1372 0.1122 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1452 0.1163 0.0935 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1252 0.0985 0.0779 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1079 0.0835 0.0649 16 0.5339 17 0.5134 18 0.4936 19 0.4746 20 0.4564 $1 PVLI= (1 + i)" 0.4581 0.4363 0.4155 0.3957 0.3769 0.3936 0.3714 0.3503 0.3305 0.3118 0.3387 0.2919 0.3166 0.2703 0.2959 0.2502 0.2765 0.2317 0.2584 0.2145 0.2519 0.2311 0.2120 0.1945 0.1784 0.2176 0.1883 0.1631 0.1415 0.1229 0.0930 0.0708 0.0541 0.1978 0.1696 0.1456 0.1252 0.1078 0.0802 0.0600 0.0451 0.1799 0.1528 0.1300 0.1108 0.0946 0.0691 0.0508 0.0376 0.1635 0.1377 0.1161 0.0981 0.0829 0.0596 0.0431 0.0313 0.1486 0.1240 0.1037 0.0868 0.0728 0.0514 0.0365 0.0261 APPENDIX 9.2 Present value of an annuity of $1 per period. Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 16% 18% 20% 1 2 3 0.9615 1.8861 2.7751 3.6299 4.4518 0.9524 1.8594 2.7232 3.5460 4.3295 0.9434 1.8334 2.6730 3.4651 4.2124 0.9346 1.8080 2.6243 3.3872 4.1002 0.9259 1.7833 2.5771 3.3121 3.9927 0.9174 1.7591 2.5313 3.2397 3.8897 0.9091 1.7355 2.4868 3.1698 3.7907 0.9009 1.7125 2.4437 3.1024 3.6959 0.8929 1.6901 2.4018 3.0373 3.6048 0.8850 1.6681 2.3612 2.9745 3.5172 0.8772 1.6467 2.3216 2.9137 3.4331 0.8621 1.6052 2.2459 2.7982 3.2743 0.8475 1.5656 2.1743 2.6901 3.1272 0.8333 1.5278 2.1065 2.5887 2.9906 4 5 6 4.4859 7 8 5.2421 6.0021 6.7327 7.4353 8.1109 5.0757 5.7864 6.4632 7.1078 7.7217 4.9173 5.5824 6.2098 6.8017 7.3601 4.7665 5.3893 5.9713 6.5152 7.0236 4.6229 5.2064 5.7466 6.2469 6.7101 5.0330 5.5348 5.9952 6.4177 4.3553 4.8684 5.3349 5.7590 6.1446 4.2305 4.7122 5.1461 5.5370 5.8892 4.1114 4.5638 4.9676 5.3282 5.6502 3.9975 4.4226 4.7988 5.1317 5.4262 3.8887 4.2883 4.6389 4.9464 5.2161 3.6847 4.0386 4.3436 4.6065 4.8332 3.4976 3.8115 4.0776 4.3030 4.4941 3.3255 3.6046 3.8372 4.0310 4.1925 9 10 11 12 13 14 15 8.7605 9.3851 9.9856 10.5631 11.1184 8.3064 8.8633 9.3936 9.8986 10.3797 7.8869 8.3838 8.8527 9.2950 9.7122 7.4987 7.9427 8.3577 8.7455 9.1079 7.1390 7.5361 7.9038 8.2442 6.8052 7.1607 7.4869 7.7862 8.0607 6.4951 6.8137 7.1034 7.3667 7.6061 6.2065 6.4924 6.7499 6.9819 7.1909 5.9377 6.1944 6.4235 6.6282 6.8109 5.6869 5.9176 6.1218 6.3025 6.4624 5.4527 5.6603 5.8424 6.0021 6.1422 5.0286 5.1971 5.3423 5.4675 5.5755 4.6560 4.7932 4.9095 5.0081 5.0916 4.3271 4.4392 4.5327 4.6106 4.6755 8.5595 8.3126 8.5436 16 11.6523 10.8378 10.105 17 12.1657 11.2741 10.4773 18 12.6593 11.6896 10.8276 19 13.1339 12.0853 11.1581 20 13.5903 12.4622 11.4699 1 $1 - (1 + i)" PVAL = i 466 8.8514 9.7632 9.1216 10.0591 9.3719 10.3356 9.6036 10.5940 9.8181 8.7556 7.8237 8.0216 8.2014 8.3649 8.5136 7.3792 7.5488 7.7016 7.8393 7.9633 6.9740 7.1196 7.2497 7.3658 7.4694 .603 6.7291 6.8399 6.9380 7.0248 6.2651 6.3729 6.4674 6.5504 6.6231 5.6685 5.7487 5.8178 5.8775 5.9288 5.1624 5.2223 5.2732 5.3162 5.3527 4.7296 4.7746 4.8122 4.8435 4.8696 8.9501 9.1285