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Capital Budgeting problem Data: Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Number of workers needed 3 Annual hours to be worked per employee 2000 Earnings per hour for employees $12.00 Annual health benefits per employee $2,500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1,100,000 cans per year $330,000 Annual cost of direct labor for new employees: Wages $72,000 Health benefits $7,500 Other benefits $12,960 Total wages and benefits $92,460 Total annual production costs $422,460 Annual cost to purchase cans $495,000 Check Figures are as follows: Cost to Produce: Make, the Total annual production costs is $422,460 Purchase, the Annual cost to purchase cans is $495,000 Part 1 Cash flows over the life of the project Total Annual cash flows (before tax amount): $104,540 Total Annual cash flows (after tax amount): $58,351 Part 2 Payback Period Payback period: 3.43 years Part 3 Annual rate of return Before tax income $40,540 After tax income $26,351 ARR Rate 13.18% Part 4 Net Present Value at 12% PV Before tax income $55,460 After tax income $101,649 NPV $33,035 Part 5 Internal Rate of Return at 18% PV Before tax income $55,460 After tax income $101,649 NPV $-56 Part 5 Internal Rate of Return at 16% PV Before tax income $55,460 After tax income $101,649 NPV $10,081

I have different check figures provided from the instructor for parts 4 & 5 than the numbers provided in the solution. The question posed that may have caused the financial difference. The unit-of-production depreciation

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