The management of Kunkel Company is considering the purchase of a $38,000 machine that would reduce operating costs by $8,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 11%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? EXHIBIT 14B-1 Present Value of S1; 1(1+r) n Periods 4% 5% 6% 7% 1 0.962 0.952 0.943 0.935 2 0.925 0.907 0.890 0.873 8% 9% 0.926 0.917 0.857 0.842 3 0.889 0.864 0.840 4 0.855 0.823 0.792 0.816 0.763 0.794 0.772 0.751 0.735 0.708 0.683 5 0.822 0.784 | 0.747 0.713 0.681 0.650 0.621 6 0.790 0.746 0.705 0.666 0.630 0.596 7 0.760 0.711 0.665 0.623 8 0.731 0.677 0.627 9 0.703 0.645 0.592 10 0.676 0.614 0.558 11 12 13 14 0.650 0.585 0.527 0.625 0.557 0.497 0.601 0.530 0.469 0.577 0.505 0.442 15 0.555 0.481 0.417 16 17 18 19 0.547 0.502 0.467 0.544 0.500 0.460 0.424 0.508 0.463 0.422 0.386 0.475 0.429 0.388 0.350 0.444 0.397 0.356 0.319 0.415 0.368 0.326 0.290 0.388 0.340 0.299 0.263 0.362 0.315 0.275 0.239 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.583 0.582 0.540 20 21 0.456 0.377 0.312 0.258 0.215 0.439 0.359 0.294 0.242 0.199 0.178 0.149 22 0.422 0.342 0.278 0.226 0.184 23 0.406 0.326 0.262 0.211 0.170 0.138 24 0.390 0.310 0.247 0.197 0.158 0.126 25 26 0.375 0.295 0.233 0.184 0.146 0.361 0.281 0.220 0.172 0.135 0.116 27 28 29 0.347 0.268 0.207 0.161 0.333 0.255 0.196 0.150 0.321 0.243 0.185 0.141 0.125 0.116 0.107 30 40 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.731 0.712 | 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.434 0.404 | 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 | 0.162 0.149 0.137 0.126 0.116 0.107 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012 0.164 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0.102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0.008 0.007 0.006 0.005 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.090 | 0.069 | 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.082 0.063 0.048 0.037 0.029 0.022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.423 0.410 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; 1 r [1-1(1+r)n] Periods 4% 5% 6% 1 0.962 0.952 0.943 7% 0.935 2 1.886 1.859 1.833 1.808 3 2.775 2.723 2.673 4 3.630 3.546 3.465 5 4.452 4.329 4.212 6 5.242 2.624 3.387 4.100 5.076 4.917 4.767 7 6.002 8 9 10 11 12 13 14 10.563 9.899 9.295 8.745 6.302 15 11.118 10.380 9.712 9.108 6.811 6.462 16 11.652 10.838 10.106 9.447 8.851 6.974 6.604 17 12.166 11.274 10.477 9.763 9.122 8.544 7.120 18 12.659 11.690 10.828 10.059 9.372 8.756 19 20 21 22 23 24 25 13.134 12.085 11.158 10.336 9.604 8.950 13.590 12.462 | 11.470 | 10.594 9.818 9.129 14.029 12.821 | 11.764 | 10.836| 10.017| 9.292 14.451 13.163 12.042 11.061 10.201 9.442 14.857 13.489 | 12.303 | 11.272 10.371 | 9.580 15.247 13.799 12.550 11.469 10.529 9.707 15.622 14.094 12.783 11.654 10.675 9.823 9.077 26 27 28 29 30 40 15.983 14.375 13.003 11.826 10.810 9.929 9.161 16.330 14.643 13.211 11.987 10.935 10.027 9.237 16.663 14.898 13.406 12.137 11.051 10.116 9.307 16.984 15.141 13.591 12.278 11.158 10.198 9.370 17.292 15.372 13.765 12.409 11.258 10.274 9.427 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1.952 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 | 2.951 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 | 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 | 3.327 | 3.242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 | 5.216 5.019 4.833 4.659 4.494 4.339 | 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 8.244 7.786 7.367 6.982 6.628 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 8.559 8.061 7.606 7.191 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 8.313 7.824 7.379 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 8.022 7.549 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 8.649 8.075 7.562 7.102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 | 4.292 4.121 3.963 8.772 8.176 7.645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5.723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 8.985 8.348 7.784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 8.488 7.896 7.372 6.906 | 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4.151 3.988 8.548 7.943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 8.602 7.984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 8.951 8.244 7.634 7.105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999