Payback, net present value, relevant costs, sensitivity analysis. The Students' Association of Your University has been operating
Question:
Payback, net present value, relevant costs, sensitivity analysis. The Students' Association of Your University has been operating a cafeteria, but it is considering converting it to a com- pletely automated set of vending machines. If the change is made, the old equipment would be sold now for whatever cash it might bring. The vending machines would be purchased immediately for cash. A catering firm would take complete responsibility for servicing and replenishing the vending machines and would pay the Student Association a predetermined percentage of the gross vending receipts. The present cafeteria equipment has 10 years of remaining useful life. The new vending machines have a 10-year useful life. The following data are available (in thousands):
REQUIRED Compute the following for the vending machine investment:
1. Expected increase in net annual operating cash inflows as a result of investing in the vending machines 2. Payback period 3. Net present value 4. Point of indifference (zeréd NPV) in terms of annual gross vending machine receipts.LO1
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780135004937
5th Canadian Edition
Authors: Charles T. Horngren, Foster George, Srikand M. Datar, Maureen P. Gowing