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 pizzas. 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.) 1. What would be the total annual cash inflows associated with the new truck for capital budgeting purposes? 2. Find the internal rate of return promised by the new truck to the nearest whole percent.
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 pizzas. 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.) 1. What would be the total annual cash inflows associated with the new truck for capital budgeting purposes? 2. Find the internal rate of return promised by the new truck to the nearest whole percent.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 14P
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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 pizzas. 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.)
1. What would be the total annual
2. Find the
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