How would I do this problem? 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 120 baseballs per hour to sewing 216 per hour. The contribution margin per unit is $0.46 per baseball. Assumethat 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 $27 per hour. The sewingmachine will cost $330,500, have a 10-year life, and will operate for 1,400 hours per year. The packing machine will cost $159,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of returnof 10% on its investments.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.8331.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.3265.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. Round to the nearest dollar.Sewing MachinePacking MachinePresent value of annual net cash flowsAmount to be investedNet present valueb. Determine the present value index for the two machines. If required, round your answers to two decimal places.Sewing MachinePacking MachinePresent value indexc. If Diamond and Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade ascorrect.)

a. Sewing machine Cost saved=(216-120)*0.46=$44.16*1400 $61824/year Cost of machine=$330500 Present…

e Index estment in one of two machines. The sewing machine will increase productivity from sewing 120 baseballs per hour to sewing 216 per hour. The contribution margin per unit is $0.46 per baseball. Assur 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 $27 per hour. The sewir - life, and will operate for 1,400 hours per year. The packing machine will cost $159,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return Compound Interest 15% 20% 0.870 0.833 1.626 1.528 2.283 2.106 2.855 2.589 3.353 2.991 3.785 3.326 4.160 3.605 4.487 3.837 4.772 4.031 5.019 4.192 two machines. Use the table of present values of an annuity of $1 above. Round to the nearest dollar. Sewing Machine Packing Machine he two machines. If required, round your answers to two decimal places. ewing Machine Packing Machine for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade as

e Index estment in one of two machines. The sewing machine will increase productivity from sewing 120 baseballs per hour to sewing 216 per hour. The contribution margin per unit is $0.46 per baseball. Assur 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 $27 per hour. The sewir - life, and will operate for 1,400 hours per year. The packing machine will cost $159,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return Compound Interest 15% 20% 0.870 0.833 1.626 1.528 2.283 2.106 2.855 2.589 3.353 2.991 3.785 3.326 4.160 3.605 4.487 3.837 4.772 4.031 5.019 4.192 two machines. Use the table of present values of an annuity of $1 above. Round to the nearest dollar. Sewing Machine Packing Machine he two machines. If required, round your answers to two decimal places. ewing Machine Packing Machine for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade as

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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Question

How would I do this problem?

Net Present Value Method and Present Value Index
Diamond and Turf Inc. is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 120 baseballs per hour to sewing 216 per hour. The contribution margin per unit is $0.46 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 $27 per hour. The sewing
machine will cost $330,500, have a 10-year life, and will operate for 1,400 hours per year. The packing machine will cost $159,300, have a 10-year life, and will operate for 1,200 hours per year. Diamond and Turf seeks a minimum rate of return
of 10% 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
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
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
a. Determine the net present value for the two machines. Use the table of present values of an annuity of $1 above. Round to the nearest dollar.
Sewing Machine
Packing Machine
Present value of annual net cash flows
Amount to be invested
Net present value
b. Determine the present value index for the two machines. If required, round your answers to two decimal places.
Sewing Machine
Packing Machine
Present value index
c. If Diamond and Turf has sufficient funds for only one of the machines and qualitative factors are equal between the two machines, in which machine should it invest? (If both present value indexes are the same, either machine will grade as
correct.)

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