The Lynbrook Candy Company would like to buy a new machine that would automatically $$dip$$

chocolates. The dipping operation currently is done largely by hand. The machine the company

is considering costs $$150,000.$ The manufacturer estimates that the machine would be usable for

five years but would require the replacement of several key parts at the end of the third year.

These parts would cost $$9,000,$ including installation. Lynbrook would also be required to

increase working capital by $$10,000$ at the beginning to operate the new machine. This will be

recovered at the end of the $5$ years. The machine could be sold for $$10,000$ at the end of its life.

The company estimates that the cost to operate the machine will be $$9,000$ per year. The present

method of dipping chocolates costs $$25,000$ per year. In addition to reducing costs, the new

machine will increase production by $8,000$ boxes of chocolates per year. The company realizes a

contribution margin of $$1\mathrm{.}50$ per box. A $20\%$ rate of return is required on all investments.

Required:

$1.$ What are the annual net cash inflows that will be provided by the new dipping machine?

$2.$ Compute the new machine$$s net present value. Round all dollar amounts to the nearest whole

dollar.

$3.$ Should the investment in the machine be made by Lynbrook?

$4.$ What is the Internal Rate of Return $($nearest whole $\%)?$