### Net Present Value Method and Present Value IndexDiamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 190 baseballs per hour to sewing 342 per hour. The contribution margin per unit is $0.36 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $26 per hour. The sewing machine will cost $315,900, will have an eight-year life, and will operate for 1,400 hours per year. The packing machine will cost $131,800, will have an eight-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return of 12% on its investments.#### Present Value of an Annuity of $1 at Compound Interest| Year | 6% | 10% | 12% | 15% | 20% ||------|-------|-------|-------|-------|-------|| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 || 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 || 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 || 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 || 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 || 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 || 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 || 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 || 9 | 6.802 | 5.759 | 5.328 | 4. Here is the transcription of the provided text, structured to appear on an educational website, including detailed explanations of any graphs and diagrams found in the image:---### Net Present Value Calculation for Machines#### Table of Present Values of an Annuity of $1The table below provides the present values for different periods and interest rates:| | | | | | ||-------|-------|-------|-------|-------|-------|| Period| 6% | 9% | 11% | 12% | 15% ||-------|-------|-------|-------|-------|-------|| 1 | 0.943 | 0.917 | 0.901 | 0.893 | 0.870 || 2 | 1.833 | 1.759 | 1.712 | 1.690 | 1.626 || 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 || 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 || 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 || 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 || 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 || 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 || 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 || 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |**Exercise: Determine the Net Present Value (NPV) for the Two Machines**Use the table of present values of an annuity of $1 above. Round to the nearest dollar and complete the following tables.#### Sewing Machine vs. Packing Machine Evaluation**Inputs:**| Item | Sewing

Annual net cash flows (Sewing Machine) = (342-190)*$0.36*1400 hour = $76,608 Annual net cash flows…

Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 190 baseballs per hour to sewing 342 per hour. The contribution margin per unit is $0.36 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $26 per hour. The sewing machine will cost $315,900, will have an eight-year life, and will operate for 1,400 hours per year. The packing machine will cost $131,800, will have an eight-year life, and will operate

Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 190 baseballs per hour to sewing 342 per hour. The contribution margin per unit is $0.36 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $26 per hour. The sewing machine will cost $315,900, will have an eight-year life, and will operate for 1,400 hours per year. The packing machine will cost $131,800, will have an eight-year life, and will operate

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Help please and thank you!
Kindly help me solve this problem using Excel. Have to calculate the payback period for the project, calculate the NPV for the project and calculate the IRR for the project.
Lim has already spent $30,700 to manufacture a hamster food product called Pet Health. Lim currently has 10,000 bags of Pet Health on hand that can be sold for $94,480. Alternatively, Lim can process it further into a different product, Premium Pet, at an additional cost of $6,350. If Lim processes further, the Premium Pet can be sold for $102,900. This would result in revenue of: Multiple Choice $102,900. $100,830. $8,420. $2,070. $6,350.
K Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,400 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs $49. The cost of each light is $0.95. The holding cost is $0.15 per light per year. a) What is the optimal size of the production run? units (round your response to the nearest whole number).
Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,352. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $390,600 2 400,200 3 410,000 4 425,200 5 432,400 6 435,500 7 436,300 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,500. This new equipment would require maintenance costs of $94,900 at the end of the fifth year. The cost of capital is 9%. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign…
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $20 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Since we use 80,000 drums a year, that would be an annual cost savings of $436,000.” Antilles Refining’s current cost to manufacture one drum is given below (based on 80,000 drums per year): Direct materials $ 12.00 Direct labor 6.50 Variable overhead 1.50 Fixed overhead ($2.90 general company overhead, $1.80 depreciation, and $0.75 supervision) 5.45 Total cost per drum $ 25.45 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be…
Mighty Safe Fire Alarm is currently buying 55,000 motherboards from MotherBoard, Inc., at a price of $67 per board. Mighty Safe is considering making its own boards: The costs to make the board are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $86,000. Which option should be selected and why? a. buy, $244,200 increase in profits O b. buy, $86,000 increase in profits Oc. make, $244,200 increase in profits Od. make, $330,000 increase in profits
Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc. at a price of $65 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $28 per unit; direct labor, $10 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why?