Whispering Winds Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $108,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $8,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $102,000. Martson Molders currently sells a molding machine that will allow Whispering Winds Pix to increase production and sales to 20,000frames per year. The machine, which has a ten-year life, sells for $143,000 and would cost $15,000 per year to operate. Whispering Winds Pix’s current machine costs only $8,000 per year to operate. If Whispering Winds Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $20,000 at the end of its ten-year life. Whispering Winds Pix uses straight-line depreciation. Click here to view the factor table. (a) Incorrect answer icon Your answer is incorrect. Calculate the new machine’s net present value assuming a 16% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Net present value $enter the net present value in dollars rounded to 0 decimal places eTextbook and Media Assistance Used eTextbook 1 eTextbook 2 eTextbook 3 Save for Later Attempts: 2 of 3 used Submit Answer (b) Use Excel or a similar spreadsheet application to calculate the new machine’s internal rate of return. (Round answer to 2 decimal places, e.g. 1.25%.) Internal rate of return enter the internal rate of return in percentages rounded to 1 decimal place % eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (c) Calculate the new machine’s payback period. (Round answer to 2 decimal places, e.g. 1.25.) Payback period enter the payback period in years rounded to 2 decimal places years eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer

Whispering Winds Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $108,000 for the machine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a $8,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 15,000 frames per year, generating a total contribution margin of $102,000. Martson Molders currently sells a molding machine that will allow Whispering Winds Pix to increase production and sales to 20,000frames per year. The machine, which has a ten-year life, sells for $143,000 and would cost $15,000 per year to operate. Whispering Winds Pix’s current machine costs only $8,000 per year to operate. If Whispering Winds Pix purchases the new machine, the old machine could be sold at its book value of $5,000. The new machine is expected to have a salvage value of $20,000 at the end of its ten-year life. Whispering Winds Pix uses straight-line depreciation. Click here to view the factor table. (a) Incorrect answer icon Your answer is incorrect. Calculate the new machine’s net present value assuming a 16% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.) Net present value $enter the net present value in dollars rounded to 0 decimal places eTextbook and Media Assistance Used eTextbook 1 eTextbook 2 eTextbook 3 Save for Later Attempts: 2 of 3 used Submit Answer (b) Use Excel or a similar spreadsheet application to calculate the new machine’s internal rate of return. (Round answer to 2 decimal places, e.g. 1.25%.) Internal rate of return enter the internal rate of return in percentages rounded to 1 decimal place % eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (c) Calculate the new machine’s payback period. (Round answer to 2 decimal places, e.g. 1.25.) Payback period enter the payback period in years rounded to 2 decimal places years eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(a)

Incorrect answer icon

Your answer is incorrect.

Calculate the new machine’s net present value assuming a 16% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal place, e.g. 58,971.)

Net present value

$enter the net present value in dollars rounded to 0 decimal places

eTextbook and Media

Assistance Used

eTextbook 1
eTextbook 2
eTextbook 3

Save for Later

Attempts: 2 of 3 used

Submit Answer

(b)

Use Excel or a similar spreadsheet application to calculate the new machine’s internal rate of return. (Round answer to 2 decimal places, e.g. 1.25%.)

Internal rate of return

enter the internal rate of return in percentages rounded to 1 decimal place %