Wendell's Donut Shoppe is investigating the purchase of a new $47,300 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,300 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,600 dozen more donuts each year. The company realizes a contribution margin of $1.50 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $13,605 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest whole percentage.) Annual cash inflows 2. Discount factor Internal rate of return 4. Internal rate of return EXHIBIT 7B-1 Present Value of $1; 1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 3% 4% 5% 16% 7% 18% 9% 20% 21% 22% 23% 24% 25% 0962 0.952 0.943 0935 0926 0.917 0.909 0.901 0.893 0885 0.87 0.870 0862 0.855 0.847 0840 0833 0.826 0820 0.813 0806 0800 | 0925 0907 0890 0.873 0.857 0842 0826 0812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0706 0.694 0.683 0.672 0661 0650 0.640 3 0889 0.864 0840 0816 0794 0772 0.751 0.731 0712 0.693 0.675 0.658 0.641 0624 0.609 0.593 0579 0564 0551 0.537 0.524 0.512 0855 0823 0792 0763 0735 0.708 0683 0659 0.636 0613 0.592 0572 0.52 0.534 0516 0499 0482 0467 0451 0437 0423 0410 5 0822 0.784 0.747 0.713 0681 0.650 0621 0593 0.567 0.543 0.51 0.497 0476 0.456 0437 0.419 0402 0386 0370 0355 0.341 0328 6 0.790 0.746 0705 0666 0630 0.596 0564 0535 0.507 0.480 0456 0432 0.410 0.390 0370 0.352 0335 0319 0.303 0.289 0.275 0.262 0760 071 0665 0623 0.583 0.547 0513 0482 0452 0.425 0400 0376 0.354 0.333 0314 0296 0279 0.263 0.249 0235 0.222 0.210 8 0731 0677 0627 0.582 0540 0502 0467 0.434 0404 0376 0351 0.327 0305 0.285 0.266 0.249 0233 0.218 0204 0191 0179 0168 10703 0645 0.592 0.544 0500 0460 0424 0.391 0361 0333 0.308 0284 0263 0.243 0.225 0.209 0194 0180 0167 0155 0144 034 10 0.676 0.614 0.558 0.508 0463 0422 0386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0191 0176 0.162 0.149 0137 0126 0116 0107 1 0.650 0.585 0527 0475 0429 0.388 0350 0.37 0.287 0261 0.237 0.215 0195 0178 0162 0.148 035 0123 012 0103 0.094 0.086 10625 0557 0497 0.444 0397 0356 0319 0.286 0257 0.231 0.208 0187 0.168 0152 0137 0124 012 0102 0092 0.083 0.076 0.069 13 0.601 0.530 0.469 0415 0368 0326 0.290 0258 0.229 0.204 0.182 0.163 0.145 0130 016 0104 0.093 0084 0075 0068 0.061 0.055 0577 0.505 0442 0388 0.340 0299 0.263 0232 0205 0181 0160 0.141 0125 011 0099 0088 0078 0.069 0062 0055 0.049 0.044 5 0555 0.481 0.417 0.362 0315 0.275 0.239 0.209 0183 0160 0.140 0123 0108 0.095 0.084 0.074 0.065 0057 0.051 0045 0040 0.035 6 0534 0458 0.394 0.339 0.292 0252 0.218 0188 0163 0141 0123 0107 0.093 0.081 0071 0062 0054 0047 0042 0036 0032 0028 053 0436 0371 0.37 0270 0.231 0198 0170 0.146 0125 0.108 0.093 0080 0069 0.060 0.052 0045 0.039 0.034 0.030 0026 0.023 18 0.494 0.416 0.350 0.296 0.250 0212 0180 0153 0130 011 0095 0081 0069 0059 0051 0044 0038 0032 0.028 0024 0.021 0018 19 0475 0396 0.331 0277 0.232 0194 0.164 0138 0.116 0.098 0.083 0070 0.060 0051 0.043 0.037 0.031 0.027 0023 0.020 0.07 0.014 20 0.456 0.377 0312 0.258 0.215 0178 0.149 0.124 0104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0026 0.022 0019 0.016 0.014 0.012 21 0439 0359 0294 0.242 0199 0164 0135 012 0.093 0.07 0.064 0053 0.044 0.037 0.031 0.026 0.022 0018 0015 0.013 0.01 0.009 0422 0.342 0278 0226 0184 0150 0123 0101 0083 0068 0.056 0046 0038 0032 0.026 0022 0018 0.015 0.013 0.01 0009 0.007 23 0406 0326 0262 0211 0170 0138 012 0.091 0.074 0.060 0.049 0040 0.033 0.027 0.022 0018 0.015 0012 0010 0.009 0.007 0.006 10.390 0.310 0.247 0197 0158 0126 0102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0.010 0008 0.007 0006 0.005 25 0375 0.295 0.233 0.184 0146 0116 0.092 0.074 0.059 0047 0.038 0030 0.024 0.020 0.016 0.013 0010 0.009 0.007 0.006 0.005 0.004 26 0361 0.281 0220 0172 0135 0106 0.084 0.066 0.053 0.042 0.033 0026 0.021 007 0.014 0.01 0.009 0007 0.006 0.005 0.004 0.003 10.347 0.268 0.207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 001 0009 0007 0006 0.005 0004 0.003 0002 28 0333 0.255 0196 0150 0116 0.090 0.069 0.054 0.042 0.033 0.026 0020 0.016 0.012 0.010 0.008 0.006 0005 0.004 0.003 0.002 0.002 | 0.321 0.243 0185 0.141 0107 0082 0063 0048 0037 0029 0022 007 0014 001 0008 0006 0005 0004 0.003 0002 0.002 0002 30 0.308 0231 0174 0.131 0.099 0.075 0057 0.044 0.033 0026 0.020 0.05 0.012 0009 0.007 0005 0.004 0.003 0.003 0.002 0.002 0.001 40 0.208 0.142 0.097 0067 0046 0.032 0022 005 001 0008 0005 0004 0003 0002 0001 0001 0001 0000 0.000 0000 0000 0000 EXHIBIT 7B-2 Present Value of an Annuity of $1 in Arrears; 13 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0.943 0.935 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 2 1.886 1.859 1.833 1.808 1783 1.759 1736 1713 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 2.775 2.723 2.673 2.624 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 1952 3.630 3.546 3.465 3.387 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 2494 2.448 2.404 2.362 4.452 4.329 4.212 4100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.1993.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 6 5.242 5.076 4.917 4.767 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 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4712 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 8 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 9 7.435 7108 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 10 8.111 7.722 7360 7024 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 11 8.760 8.306 7.887 7.49971396.805 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 7536 71616.814 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 7103 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 10.563 9.899 9.295 8.745 8.244 7786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 15 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 17 12.166 11.274 10.477 9763 9.122 8.544 8.022 7.549 7120 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 18 12.659 11.690 10.828 10.059 9.372 8.756 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 19 13.134 12.085 11.158 10.336 9.604 8.950 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 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7645 7170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 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 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7784 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 25 15.622 14.094 12.783 11.654 10.675 9.823 9.077 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 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 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 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 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 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 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 16.984 15.141 13.591 12.278 11.158 10.198 9.370 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 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.9794.746 4.534 4.339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999 16 29