Witchcraft is a Halloween decorations manufacturer planning to purchase a new packing machine for $ 116000 with a useful life of 8 years and a terminal value of $9500 . Savings due to the machine are expected to be $23500 per year, however, parts of the machine must be replaced every year, so a working capital investment of $ 4250 must be maintained. This amount will be recoverable upon disposal. Required rate of return is 8%. All cash flows occur at year-end except for the initial investment. Ignore income taxes in your analysis.

Calculate NPV. (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $ enter your response here. Part 2 Requirement 2. Describe two methods to determine the IRR. Select all the correct statements regarding the two methods to determine the IRR. A. Trial and error can determine the discount rate that produces an NPV of $0. If two answers are very close to zero (one above and one below $0) you can use interpolation to approximate the internal rate of return. B. Financial calculators or Excel can be used to determine the discount rate when NPV$0. C. Financial calculators or Excel can only be used to determine the discount rate when NPV$0. D. Trial and error can only determine a discount rate that produces an NPV greater than $0. Part 3 Requirement 3. Without using the methods in requirement 2, state whether the IRR will be lower or higher than %. How do you know? Select the correct statement regarding the two methods in requirement 2. State whether the IRR will be lower or higher than %. A. Because the NPV is positive, the IRR is greater than %. B. Because the NPV is negative, the IRR is greater than %. C. Because the NPV is negative, the IRR is less than %. D. Because the NPV is positive, the IRR is less than %. Part 4 Requirement 4. Calculate AARR based on net initial investment. (Round interim calculations to the nearest whole dollar. Round the final rate to two decimal places, X.XX%.) The accrual accounting rate of return (AARR) is enter your response here...% based on net initial investment.

Witchcraft is a Halloween decorations manufacturer planning to purchase a new packing machine for $116,000 with a useful life of 8 years and a terminal value of $9,500. Savings due to the machine are expected to be $23,500 per year, however, parts of the machine must be replaced every year, so a working capital investment of $4,250 must be maintained. This amount will be recoverable upon disposal. Required rate of return is 8%. All cash flows occur at year-end except for the initial investment. Ignore income taxes in your analysis. (Click the icon to view the future value of $1 factors.) (Click the icon to view the future value of annuity of $1 factors.) (Click the icon to view the present value of $1 factors.) (Click the icon to view the present value of annuity of $1 factors.) Required Requirement 1. Calculate NPV. (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) The net present value is $. Requirement 2. Describe two methods to determine the IRR. Select all the correct statements regarding the two methods to determine the IRR. A. Trial and error can determine the discount rate that produces an NPV of $0. If two answers are very close to zero (one above and one below $0) you can use interpolation to approximate the internal rate of return. OB. Financial calculators or Excel can be used to determine the discount rate when NPV = $0. C. Financial calculators or Excel can only be used to determine the discount rate when NPV > $0. D. Trial and error can only determine a discount rate that produces an NPV greater than $0. Requirement 3. Without using the methods in requirement 2, state whether the IRR will be lower or higher than 8%. How do you know? Select the correct statement regarding the two methods in requirement 2. State whether the IRR will be lower or higher than 8%. O A. Because the NPV is positive, the IRR is greater than 8%. O B. Because the NPV is negative, the IRR is greater than 8%. O C. Because the NPV is negative, the IRR is less than 8%. O D. Because the NPV is positive, the IRR is less than 8%. Requirement 4. Calculate AARR based on net initial investment. (Round interim calculations to the nearest whole dollar. Round the final rate to two decimal places, X.XX%.) The accrual accounting rate of return (AARR) is % based on net initial investment