Answer All Parts

Magnificent Candy Company is considering purchasing a second chocolate dipping machine in order to expand its business. The information Magnificent has accumulated regarding the new machine is: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. - X Data table Requirement 1. Calculate the following for the new machine: a. Net present value (NPV) (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for whole dollar.) Cost of the machine Increased annual contribution margin $ 110,000 $21,000 The net present value is Life of the machine 10 years 10% Required rate of return Requirements 1. Magnificent estimates it will be able to produce more candy using the second machine and thus increase its annual contribution margin. It also estimates there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers. Assume all cash flows occur at year-end except for initial investment amounts. Calculate the following for the new machine: a. Net present value b. Payback period c. Discounted payback period d. Internal rate of return (using the interpolation method) Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation) What other factors should Magnificent Candy consider in deciding whether to purchase the new machine? e. Print Done 2