EXERCISE $13-1$ Net Present Value Method $[$L$01]$

The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $$25,000$ machine that would reduce operating costs in its warehouse by $$4,000$ per year. At the end of the machine's $10-$year useful life, it will have no scrap value. The company's required rate of return is $12\%.$

Required:

$($Ignore income taxes.$)$

Determine the net present value of the investment in the machine.

What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?

EXERCISE $13-2$ Internal Rate of Return $[$L$02]$

Pisa Pizza Parlor is investigating the purchase of a new $$45,000$ delivery truck that would contain specially designed warming racks. The new truck would have a six$-$year useful life. It would save $$5,400$ per year over the present method of delivering pizz's. In addition, it would result in the sale of $1,800$ more pizzas each year. The company realizes a contribution margin of $$2$ per pizza.

Required:

$($Ignore income taxes.$)$

What would be the total annual cash inflows associated with the new truck for capital budgeting purposes?

Find the internal rate of return promised by the new truck to the nearest whole percent.