Stone Corporation Is Interested in Purchasing a State-Of-The-Art Widget Machine $\text { Compute the net pressent value of the new machine }$

question 63

Essay

Stone Corporation is interested in purchasing a state-of-the-art widget machine for its manufacturing plant.The new machine has been designed to basically eliminate all errors and defects in the widget-making production process.The new machine will cost $150,000,and have a salvage value of $70,000 at the end of its seven-year useful life.Stone has determined that cash inflows for years 1 through 7 will be as follows: $32,000;$57,000;$15,000;$28,000;$16,000;$10,000,and $15,000,respectively.Maintenance will be required in years 3 and 6 at $10,000 and $7,000 respectively.Stone uses a discount rate of 11 percent and wants projects to have a payback period of no longer than five years.
Present value tables or a financial calculator are required.
a. $\text { Compute the net pressent value of the new machine }$
b. $\text { Compute the firm's profitability index }$
c. $\text { Compute the payback period }$
d. $\text { Evaluate this investment proposal for Stone Company. }$

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Definitions:

Recycled Products

Items made from materials that have been processed and reused, contributing to environmental sustainability.

Footwear

Any type of shoe or similar item designed to be worn on the feet for protection, comfort, or fashion.

Passive Voice

A sentence construction where the subject is acted upon by the verb, often obscuring who is performing the action.

Assigning Blame

The act of attributing responsibility for a fault or wrong to a person or entity.