Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,500 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 12B-1 and Exhibit 12B-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 answer 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 $13,755 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.) 1. Annual cash inflows 2. Discount factor 3. Internal rate of return % 4. Internal rate of return % EXHIBIT 12B-1 Present Value of $1; 3% 16% 19% 22% - 7 Periods 4% 5% 6% 7% 8% 9% 10% 11% 2% 14% 5% 17% 18% 20% 21% 23% 24% 25% 0962 0952 0943 0935 0926 0917 0909 0901 0.893 0.885 087 0870 0862 0855 0847 0840 0833 0826 0820 0.813 0.806 0.800 2 0925 0907 0.890 0.873 0.857 0842 0826 0.82 0.797 0.783 0.769 0756 0743 0731 0718 0706 0694 0683 0672 0661 0.650 0640 3 0889 0864 0.840 0.816 0.794 072 0751 0731 0712 0693 0675 0658 0641 0624 0609 0.593 0579 0564 0551 0.537 0.524 0512 4 0855 0823 0.792 0763 0.735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0516 0.499 0482 0467 0451 0437 0.423 0410 5 0822 0784 0.747 07/13 0.681 0650 0621 0593 0567 0543 0.519 0497 0476 0456 0437 0419 0402 0386 0370 0355 0341 0328 6 0.790 0.746 0.705 0.666 0630 0.596 0.564 0535 0.507 0.480 0.456 0.432 0.410 0390 0.370 0.352 0335 0.319 0.303 0.289 0.275 0.262 0760 0711 0665 0623 0.583 0547 0513 0482 0452 0.425 0400 0376 0354 0333 0314 0.296 0279 0263 0249 0235 0.222 0.210 8 0731 067 0627 0.582 0540 0502 0.467 0434 0404 0376 0351 0327 0305 0285 0266 0.249 0233 0218 0204 0191 079 0168 9 0.703 0.645 0592 0.544 0.500 0.460 0424 0391 0361 0.333 0.308 0.284 0263 0.243 0225 0.209 0194 0180 0167 0155 0.144 0134 10 0676 0614 0.558 0508 0.463 0422 0386 0352 0322 0295 0270 0247 0227 0208 0191 0.176 0162 0149 0137 0126 016 0107 11 0650 0585 0527 0475 0.429 0.388 0350 037 0.287 0.261 0.237 0.215 0195 0.178 0162 0.148 0135 0123 0.112 0.103 0.094 0.086 12 0625 0.557 0497 0.444 0.397 0.356 0319 0.286 0.257 0.231 0.208 0187 0.168 0152 0.137 0.124 0.112 0102 0.092 0083 0.076 0069 13 0601 0530 0469 0.415 0368 0326 0290 0258 0229 0.204 0182 0163 0145 0130 0116 0104 0.093 0084 0075 0068 0061 0.055 14 0577 0505 0442 0.388 0.340 0.299 0263 0232 0.205 0.181 0160 0.141 0125 011 0.099 0.088 0.078 0069 0062 0.055 0.049 0.044 5 0555 0481 0417 0.362 0.315 0275 0239 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 0.057 0051 0045 0.040 0035 16 0534 0458 0394 0339 0292 0252 0218 0188 0163 0141 0123 0107 02093 0.081 0071 0.062 0.054 0047 0042 0.036 0.032 0.028 7 0513 0436 0371 0317 0270 0231 0198 0170 0.146 0125 0.108 0.093 0080 0.069 0.060 0.052 0045 0039 0.034 0030 0.026 0.023 18 0494 0416 0.350 0.296 0.250 0.212 0180 0.153 0130 0.11 0.095 0.081 0.069 0059 0.051 0044 0.038 0032 0028 0024 0021 0.018 9 0475 0396 0331 0.27 0232 0194 0.164 0138 0116 0.098 0.083 0070 0060 0.051 0.043 0.037 0.031 0027 0.023 0.020 0.07 0014 20 0456 0377 0.312 0258 0.215 0.178 0.149 0.124 0104 0.087 0.073 0.061 0051 0043 0037 0.031 0026 0022 009 0.016 0.014 0.012 21 0439 0359 0294 0.242 0199 0164 0135 0112 0093 007 0064 0053 0044 0037 0031 0.026 0022 0018 005 0013 0.011 0.009 22 0422 0342 0278 0226 0184 0150 0123 0101 0.083 0.068 0.056 0046 0038 0032 0026 0022 0018 006 003 0.01 0.009 0.007 23 0406 0326 0.262 0.211 0170 0138 0112 0091 0074 0.060 0.049 0040 0033 0027 0.022 0.018 0015 0012 0010 0.009 0.007 0.006 24 0390 0310 0247 0197 0.158 0126 0102 0082 0066 0.053 0.043 0035 0028 0023 0.019 0.05 0013 0010 0008 0.007 0.006 0.005 25 0375 0295 0.233 0184 0.146 016 0092 0074 0059 0047 0.038 0030 0024 0020 0016 0.013 0.010 0009 0007 0.006 0.005 0.004 26 0361 0281 0.220 0.172 0135 0106 0084 0066 0053 0042 0033 0026 0021 007 0.04 0.01 0009 0007 0006 0.005 0.004 0.003 27 0347 0.268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 0011 0009 0007 0006 0005 0004 0.003 0002 28 0333 0255 0196 0150 0116 0090 0069 0054 0.042 0.033 0026 0020 0016 0012 0010 0008 0006 0005 0004 0003 0002 0002 29 0321 0243 0185 0.141 0107 0082 0063 0048 0.037 0.029 0.022 0017 0014 001 0.008 0.006 0.005 0004 0003 0.002 0002 0.002 30 0308 0231 0174 0131 0099 0075 0057 0044 0033 0.026 0020 005 0012 0009 0007 0005 0004 0003 0003 0002 0002 0001 40 0208 0142 0.097 0067 0.046 0032 0022 0015 001 0.008 0.005 0004 0003 0002 0001 0.001 0001 0000 0000 0000 0.000 0.000 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears; 15% 20% 23% 24% 7 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 16% 17% 18% 19% 21% 22% 25% 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 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 3 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 2011 1.981 1.952 4 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 2.494 2.448 2.404 2.362 5 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3199 3.127 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 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 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 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 10 8.111 7.722 7.360 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 3.7993.682 3.571 11 8.760 8.306 7.887 7499 7139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4177 4.035 3.902 3.776 3.656 12 9.385 8.863 8.384 7.943 7.536 7161 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 13 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 14 10.563 9.899 9.295 8.745 8.244 7.786 7367 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 16 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 9.763 9.122 8.544 8.022 7.5497.120 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 7839 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 7469 7025 6.623 6.259 5.929 5.628 5.353 5101 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 22 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 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 23 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7718 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 24 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 5.1954.948 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 7984 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 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7470 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 7496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9.7798.951 8.244 7634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999