MODULE 2: TEXT & SAMPLE PROBLEMS 113 Table 1: Present Value of $1.00 2% 4% 0.962 NI 0.92 0.889 Period 1% 1 0.990 2 0.980 3 0.971 4 0.961 5 0.951 6 0.942 7 0.933 8 0.923 9 0.914 10 0.905 11 0.896 12 0.887 13 0.879 14 0.870 0.855 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0,340 10% 11% 12% 13% 14% 15% 0.909 0.901 | 0.893 0.885 0.877 0.870 0.826 0.812 0.797 0.783 0.769 0.756 0.751 0.731 0.712 0,693 0.675 0.658 0.683 0.659 0.636 0.613 0.592 0.572 0.621 0.593 0.567 0.543 0.519 0.497 0.564 0.535 0.507 0.480 0.456 0.432 0.513 0.482 0.452 0.425 0.400 0.376 0.467 0.434 0.404 0.376 0.351 0.327 0.424 0.391 0.361 0.333 0.308 0.284 0.386 0.352 0.322 0.295 0.270 0.247 0.350 0.317 0.287 0.261 0.237 0.215 0.319 0.286 0.257 0.231 0.208 0.187 0.290 0.258 0.229 0.229 0.204 0.182 0.163 0.263 0.232 0.205 0.1810.160 0.141 0.460 0.422 0.388 0.356 0.326 0.299 Tohlo 7: Present Yalue of an Annuity of $1.00 X Company is considering producing and selling a new product. After conducting a market research study that cost $5,000, company estimates are that sales of the product will be 8,100 units in each of the next four years, contribution margin per unit will be $6.20, and annual fixed costs will be $16,380. In order to produce the new product, additional equipment would have to be purchased, costing $120,000, with no salvage value at the end of four years. What is the internal rate of return of producing and selling this new product? [Use the present value tables in the Coursepack.] A: 0.03 B: 0.04| OC: 0.05 D: 0.06 E: 0.07 F: 0.08 Submit Answer Tries 0/99 One of X Company's production machines was badly damaged recently. Unfortunately, the machine was purchased just two years earlier for $40,000. The company must either repair the machine or purchase a new machine. The estimated cost of repairing the machine is $21,000, after which operating costs will be $69,000 a year. It will also require a maintenance check in the third year that is estimated to cost $2,500. A new machine will cost $85,000, but it will be more efficient than the repaired machine, with annual operating cost savings of $14,000. Both the repaired machine and the new machine will last for five years, at which time the repaired one would be worthless, and new one would be worth $7,000. If it is not repaired, the damaged machine can be sold immediately for $5,000. Assuming a discount rate of 6%, what is the net present value of repairing the damaged machine instead of buying the new machine? [Use the present value tables in the Coursepack.] A: $-3,102 B: $-4,125| OC: $-5,486| OD: $-7,297|| OE: $-9,705 F: $-12,908