=+EX 26-12 Present value index obj. 3

✔ Location A, 1.07 MVP Sports Equipment Company is considering an investment in one of two machines.

The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 270 per hour. The contribution margin is $0.48 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 $384,600, have an eight-year life, and will operate for 1,700 hours per year. The packing machine will cost $157,900, have an eight-year life, and will operate for 1,600 hours per year. MVP seeks a minimum rate of return of 15% on its investments.