ently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 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 $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book
ently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 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 $12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company currently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book
Chapter21: Risk Management
Section: Chapter Questions
Problem 5P
Related questions
Question
![Use Excel or a similar spreadsheet application to calculate the new machine's internal rate of return. (Round answer to 2 decimal
places, eg. 1.25%)
Internal rate of return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7d4978a-587f-4fb0-b662-b1647e006431%2F3d49239a-7ab3-49eb-b3e1-44a508971973%2F2cgf2eq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Use Excel or a similar spreadsheet application to calculate the new machine's internal rate of return. (Round answer to 2 decimal
places, eg. 1.25%)
Internal rate of return
%
![Concord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 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
$12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company
currently produces and sells 9.000 frames per year, generating a total contribution margin of $92,500.
Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per
year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current
machine costs only $8,000 per year to operate. If Concord 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 $19,900 at the end of its ten-year life. Concord Pix uses
straight-line depreciation.
Click here to view the factor table.
(a)
Calculate the new machine's net present value assuming a 14% discount rate. (For calculation purposes, use 4 decimal places as
displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971)
Net present value $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7d4978a-587f-4fb0-b662-b1647e006431%2F3d49239a-7ab3-49eb-b3e1-44a508971973%2F2cdxex_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Concord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 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
$12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company
currently produces and sells 9.000 frames per year, generating a total contribution margin of $92,500.
Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per
year. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current
machine costs only $8,000 per year to operate. If Concord 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 $19,900 at the end of its ten-year life. Concord Pix uses
straight-line depreciation.
Click here to view the factor table.
(a)
Calculate the new machine's net present value assuming a 14% discount rate. (For calculation purposes, use 4 decimal places as
displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971)
Net present value $
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