TopCap Company is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $120,000. In addition, delivery and installation costs will total $5,500. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4.

Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.

2022	3,600	dozen
2023	5,600	dozen
2024	8,500	dozen
2025	11,300	dozen
2026	12,000	dozen

The caps have a contribution margin of $9.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Company's cost of capital for this capacity expansion has been set at 6%.

Required:

1. Calculate the net present value of the proposed investment in the new sewing machine.
2. Calculate the present value ratio of the investment.
3. What is the internal rate of return of this investment relative to the cost of capital?
4. Calculate the payback period of the investment.

Number of Periods	Discount Rate
	2%	4%	6%	8%	10%	12%	14%	16%	18%	20%
1	0.980	0.9615	0.9434	0.9259	0.9091	0.8929	0.8772	0.8621	0.8475	0.8333
2	0.961	0.9246	0.8900	0.8573	0.8264	0.7972	0.7695	0.7432	0.7182	0.6944
3	0.942	0.8890	0.8396	0.7938	0.7513	0.7118	0.6750	0.6407	0.6086	0.5787
4	0.924	0.8548	0.7921	0.7350	0.6830	0.6355	0.5921	0.5523	0.5158	0.4823
5	0.906	0.8219	0.7473	0.6806	0.6209	0.5674	0.5194	0.4761	0.4371	0.4019
6	0.888	0.7903	0.7050	0.6302	0.5645	0.5066	0.4556	0.4104	0.3704	0.3349
7	0.871	0.7599	0.6651	0.5835	0.5132	0.4523	0.3996	0.3538	0.3139	0.2791
8	0.853	0.7307	0.6274	0.5403	0.4665	0.4039	0.3506	0.3050	0.2660	0.2326
9	0.837	0.7026	0.5919	0.5002	0.4241	0.3606	0.3075	0.2630	0.2255	0.1938
10	0.820	0.6756	0.5584	0.4632	0.3855	0.3220	0.2697	0.2267	0.1911	0.1615
11	0.804	0.6496	0.5268	0.4289	0.3505	0.2875	0.2366	0.1954	0.1619	0.1346
12	0.788	0.6246	0.4970	0.3971	0.3186	0.2567	0.2076	0.1685	0.1372	0.1122
13	0.773	0.6006	0.4688	0.3677	0.2897	0.2292	0.1821	0.1452	0.1163	0.0935
14	0.758	0.5775	0.4423	0.3405	0.2633	0.2046	0.1597	0.1252	0.0985	0.0779
15	0.743	0.5553	0.4173	0.3152	0.2394	0.1827	0.1401	0.1079	0.0835	0.0649
16	0.728	0.5339	0.3936	0.2919	0.2176	0.1631	0.1229	0.0930	0.0708	0.0541
17	0.714	0.5134	0.3714	0.2703	0.1978	0.1456	0.1078	0.0802	0.0600	0.0451
18	0.700	0.4936	0.3503	0.2502	0.1799	0.1300	0.0946	0.0691	0.0508	0.0376
19	0.686	0.4746	0.3305	0.2317	0.1635	0.1161	0.0829	0.0596	0.0431	0.0313
20	0.673	0.4564	0.3118	0.2145	0.1486	0.1037	0.0728	0.0514	0.0365	0.0261
21	0.660	0.4388	0.2942	0.1987	0.1351	0.0926	0.0638	0.0443	0.0309	0.0217
22	0.647	0.4220	0.2775	0.1839	0.1228	0.0826	0.0560	0.0382	0.0262	0.0181
23	0.634	0.4057	0.2618	0.1703	0.1117	0.0738	0.0491	0.0329	0.0222	0.0151
24	0.622	0.3901	0.2470	0.1577	0.1015	0.0659	0.0431	0.0284	0.0188	0.0126
25	0.610	0.3751	0.2330	0.1460	0.0923	0.0588	0.0378	0.0245	0.0160	0.0105
30	0.552	0.3083	0.1741	0.0994	0.0573	0.0334	0.0196	0.0116	0.0070	0.0042
35	0.500	0.2534	0.1301	0.0676	0.0356	0.0189	0.0102	0.0055	0.0030	0.0017
40	0.453	0.2083	0.0972	0.0460	0.0221	0.0107	0.0053	0.0026	0.0013	0.0007
45	0.410	0.1712	0.0727	0.0313	0.0137	0.0061	0.0027	0.0013	0.0006	0.0003
50	0.372	0.1407	0.0543	0.0213	0.0085	0.0035	0.0014	0.0006	0.0003	0.0001