Wendell's Donut Shoppe is investigating the purchase of a new $37,700 donut-making machine. The new machine would permit t company to reduce the amount of part-time help needed, at a cost savings of $6,600 per year. In addition, the new machine woul allow the company to produce one new style of donut, resulting in the sale of 1,500 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What is the new machine's internal rate of return? Note: Round your final answer to the nearest whole percentage. 3. In addition to the data given previously, assume that the machine will have a $14,130 salvage value at the end of six years. Und these conditions, what is the internal rate of return? Note: Round your final answer to the nearest whole percentag 1. Annual cash inflows
Wendell's Donut Shoppe is investigating the purchase of a new $37,700 donut-making machine. The new machine would permit t company to reduce the amount of part-time help needed, at a cost savings of $6,600 per year. In addition, the new machine woul allow the company to produce one new style of donut, resulting in the sale of 1,500 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What is the new machine's internal rate of return? Note: Round your final answer to the nearest whole percentage. 3. In addition to the data given previously, assume that the machine will have a $14,130 salvage value at the end of six years. Und these conditions, what is the internal rate of return? Note: Round your final answer to the nearest whole percentag 1. Annual cash inflows
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
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