### 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

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