Special People Industries (SPI) is a nonprofit organization that employs only people with physical or mental disabilities. One of the organization's activities is to make cookies for its snack food store. Several years ago, Special People Industries purchased a special cookie-cutting machine. As of December 31, 20x0, this machine will have been used for three years. Management is considering the purchase of a newer, more efficient machine. If purchased, the new machine would be acquired on December 31, 20x0. Management expects to sell 300,000 dozen cookies in each of the next six years. The selling price of the cookies is expected to average $1.15 per dozen. Special People Industries has two options: continue to operate the old machine or sell the old machine and purchase the new machine. No trade-in was offered by the seller of the new machine. The following information has been assembled to help management decide which option is more desirable. old Machine $80,000 6 years New Machine $120,000 6 years Original cost of machine at acquisition Remaining useful life as of December 31, 20x0 Expected annual cash operating expenses: Variable cost per dozen Total fixed costs Estimated cash value of machines : December 31, 20x0 December 31, 20x6 $ 0.38 $21,000 $ 0.29 $ 11,000 $40,000 $ 7,000 $120,000 $ 20,000 Assume that all operating revenues and expenses occur at the end of the year. Use Appendix Afor your reference. (Use appropriate factor(s) from the tables provided.) Required: Required! 1-a. Use the net-present-value method to compute the net-present-value for the old machine and the new machine. The organization's hurdle rate is 16 percent. 1-b. Determine whether Special People Industries should retain the old machine or acquire the new machine. Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Use the net-present-value method to compute the net-present-value for the old machine and the new machine. The organization's hurdle rate is 16 percent. (Negative amounts should be indicated by minus sign.) Net Present Value Old machine New machine Future Value and Present Value Tables Table 1 Future Value of $1.00(1 + gn Period 4% 6% 8% 10% 12% 14% 20% 1.100 1.210 1.331 1.464 1.611 1.040 1.082 1.125 1.170 1.217 1.265 1.316 1.369 1.423 1.480 1.540 1.601 1.665 1.732 1.801 2.191 3.243 4.801 1.060 1.124 1.191 1.263 1.338 1.419 1.504 1.594 1.690 1.791 1.898 2.012 2.133 2.261 2.397 3.207 5.744 10.286 1.080 1.166 1.260 1.361 1.469 1.587 1.714 1.851 1.999 2.159 2.332 2.518 2.720 2.937 3.172 4.661 10.063 1.772 1.949 2.144 2.359 2.594 2.853 3.139 3.452 3.798 4.177 6.728 17.450 45.260 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.364 4.887 5.474 9.646 29.960 93.051 1.140 1.300 1.482 1.689 1.925 2.195 2.502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 7.138 13.743 50.950 188.880 1.200 1.440 1.728 2.074 2.488 2.986 3.583 4.300 5.160 6.192 7.430 8.916 10.699 12.839 15.407 38.338 237.380 1,469.800 Period 4% 6% 8% 12% 14% 20% Table II Future Value of a Series of $1.00 Cash Flows (Ordinary Annuity) (1 + 1)" - 1 1.000 2.040 3.122 4.247 5.416 6.633 7.898 9.214 10.583 12.006 13.486 15.026 16.627 18.292 20.024 29.778 56.085 95.026 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.898 11.491 13.181 14.972 16.870 18.882 21.015 23.276 36.778 79.058 154.762 1.000 2.080 3.246 4.506 5.867 7.336 8.923 10.637 12.488 14.487 16.646 18.977 21.495 24.215 27.152 45.762 113.283 259.057 1.000 2.100 3.310 4.641 6.105 7.716 9.487 11.436 13.580 15.938 18.531 21.385 24.523 27.976 31.773 57.276 164.496 442.597 1.000 2.120 3.374 4.779 6.353 8.115 10.089 12.300 14.776 17.549 20.665 24.133 28.029 32.393 37.280 75.052 241.330 767.090 1.000 2.140 3.440 4.921 6.610 8.536 10.730 13.233 16.085 19.337 23.045 27.271 32.089 37.581 43.842 91.025 356.790 1,342.000 1.000 2.220 3.640 5.368 7.442 9.930 12.916 16.499 20.799 25.959 32.150 39.580 48.497 59.196 72.035 186.690 1,181.900 7,343.900 Table III Present Value of $1.00 (1 + )" Table III Present Value of $1.00 (1 + )" Period 1 2 3 26% 794 .630 .500 397 5 .507 189 7 8 9 4% 962 9 25 .889 .855 822 .790 760 .731 7 03 .676 .650 .625 .601 .577 .555 .456 .308 .208 6% 8% 10% 12% 943 926 909 .893 .890 857 826 797 .840 794 751 712 .792 .735 .683 .636 747 .681 .621 567 705 .630564 .665 583 513 452 .627 540 467 404 592 500 424 361 558 463 .386 322 527 429 .350 287 .497 397 .319 257 .368 290 .229 442 340 263 205 .417 315 .239 .183 312215149104 174 .099 .057 .033 .097 .046 .022 .011 14% 16% 18% 877 862 847 769743718 .675 .641 .609 .592 .552 .516 .519 4 76 437 .456 410 370 400 3 54 314 .351 305 266 .308 263 225 2 70 227 191 237 195 .162 208 168 .137 .182 .145 116 .160 125 .099 .140 .108 .084 .073 .051 .037 .020 .012 .007 .005 .003 .001 20% 833 .694 579 482 402 335 279 233 194 162 .135 .112 093 .078 .065 .026 .004 .001 22% 820 .672 .551 .451 .370 303 249 204 167 137 .112 .092 .075 062 .051 .019 .003 - 24% 806 .650 524 423 341 275 222 179 144 116 .094 .076 .061 .049 .040 .014 .002 - 28% 30% 32% 781 .769 .758 .610 .592 .574 477 455 435 .373 350 .329 291 269 250 227 207 207 178 159 143 139 123108 108 .094 .082 .085 073 062 .066 .056 047 .052 .043 .036 .040 .033 .027 .032 .025 021 .025 .020 .016 .007 .005 .001 - - - 315 .250 198 157 125 .099 .079 062 .050 .039 .031 .010 .001 - 10 11 12 469 368 14 15 .004 40 Table IV Present Value of Series of $1.00 Cash Flows 11. 1 (1 + m) Period 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 25% 26% 28% 30% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 13.590 17.292 19.793 0.943 0.926 0.909 1.833 1.783 1.736 2.673 2.577 2.487 3.465 3.312 3.170 4.212 3.993 3.791 4.917 4.623 4.355 5.5825.206 4.868 6.210 5.747 5.335 6.8026.247 5.759 7.360 6.710 6.145 7.887 7.139 6.495 8.384 7.536 6.814 8.853 7.904 7.103 9.295 8.244 7.367 9.712 8.5597.606 11.470 9.818 8.514 13.765 11.258 9.427 15.046 11.925 9.779 0.896 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 7.469 8.055 8.244 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.623 7.003 7.105 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.929 6.177 6.234 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.353 5.517 5.548 0.833 0.820 1.528 1.492 2.106 2.042 2.589 2.494 2.991 2.864 3.326 3.167 3.605 3.416 3.837 3.619 4.031 3.786 4.1923.923 4.327 4.035 4.439 4.127 4.533 4.203 4.611 4.265 4.675 4.315 4.870 4.460 4.979 4.534 4.997 4.544 0.806 0.800 1.457 1.440 1.981 1952 2.404 2.362 2.745 2.689 3.020 2.951 3.2423.161 3.421 3.329 3.566 3.463 3.682 3.571 3.776 3.656 3.851 3.725 3.912 3.780 3.962 3.824 4.001 3.859 4.110 3.954 4.160 3.995 4.166 3.999 0.794 1.424 1.923 2.320 2.635 2.885 3.083 3.241 3.366 3.465 3.544 3.606 3.656 3.695 3.726 3.808 3.842 3.846 0.781 0.769 1.392 1.361 1.868 1.816 2.241 2.166 2.532 2.436 2.759 2.643 2.937 2.802 3.076 2.925 3.184 3.019 3.269 3.092 3.335 3.147 3.387 3.190 3.427 3.223 3.459 3.249 3.4833.268 3.546 3.316 3.569 3.332 3.571 3.333 12 13 14 15 20 30 40