Question 1:

Question 2:

a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Y5. b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 10%. Use the table of the present value of $1 presented above. When required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Diamond \& 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 margin per unit is $0.42 per baseball. Assume that any increased production of baseballs can be sold. The second 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 $19 per hour. The sewing machine will cost $282,800, will have a seven-year life, and will operate for 1,400 hours per year. The packing machine will cost $79,700, will have a seven-year life, and will operate for 1,200 hours per year. Diamond \& Turf seeks a minimum rate of return of 15% on its investments. Present Value of an Annuity of $1 at Compound Interest \begin{tabular}{cccccc} \hline Year & 6% & 10% & 12% & 15% & 20% \\ \hline 1 & 0.943 & 0.909 & 0.893 & 0.870 & 0.833 \\ 2 & 1.833 & 1.736 & 1.690 & 1.626 & 1.528 \\ 3 & 2.673 & 2.487 & 2.402 & 2.283 & 2.106 \\ 4 & 3.465 & 3.170 & 3.037 & 2.855 & 2.589 \\ 5 & 4.212 & 3.791 & 3.605 & 3.353 & 2.991 \\ 6 & 4.917 & 4.355 & 4.111 & 3.785 & 3.326 \\ 7 & 5.582 & 4.868 & 4.564 & 4.160 & 3.605 \\ 8 & 6.210 & 5.335 & 4.968 & 4.487 & 3.837 \\ 9 & 6.802 & 5.759 & 5.328 & 4.772 & 4.031 \\ 10 & 7.360 & 6.145 & 5.650 & 5.019 & 4.192 \end{tabular} 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 dollar. b. Determine the present value index for the two machines. If required, round your answers to two decimal places. Sewing Machine Packing Machine Present value index x AM Express Inc. is considering the purchase of an additional delivery vehicle for $47,000 on January 1,20Y1. The truck is expected to have a 5 -year life with an expecte residual value of $7,000 at the end of 5 years. The expected additional revenues from the added delivery capacity are anticipated to be $65,000 per year for each of the next 5 years. A driver will cost $44,000 in 20Y1, with an expected annual salary increase of $4,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. Present Value of $1 at Compound Interest a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Y5