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Big Al gives his worker's a one hour lunch and two fifteen minute breaks each day. He believes that a cold soda machine would be

Big Al gives his worker's a one hour lunch and two fifteen minute breaks each day. He believes that a
cold soda machine would be appreciated by his workers, and an appreciated worker is a good worker.
He has priced a machine at a national member only warehouse for $2,050. The machine should be
usable for 6 years, after which it would be inefficient, obsolete and would have to be disposed of at the
dump. Big Al believes that 8 cans a day will be purchased. The plant is open five days a week, 50
weeks per year. A case of soda (24 cans) costs $5.76 and Big Al believes that a price of $.65 per

can would win him good will.

- What is the estimated annual sales in cans of soda ?

- What is the CM per can of soda ?

- How many cans of soda must be sold each year to breakeven ?

- Annual incremental cash inflows from the soda machine ?

- What is the payback period in years ?

- If the time value of money is 12% per year, what is the net present value ?

- What is the internal rate of return ?

Interest Periods Interest Periods
Rate 3 4 5 6 Rate 3 4 5 6
2.0% 2.884 3.808 4.713 5.601 50.5% 1.399 1.594 1.724 1.810
2.5% 2.856 3.762 4.646 5.508 51.0% 1.391 1.584 1.711 1.795
3.0% 2.829 3.717 4.580 5.417 51.5% 1.383 1.573 1.698 1.781
3.5% 2.802 3.673 4.515 5.329 52.0% 1.375 1.563 1.686 1.767
4.0% 2.775 3.630 4.452 5.242 52.5% 1.368 1.553 1.674 1.753
4.5% 2.749 3.588 4.390 5.158 53.0% 1.360 1.542 1.662 1.740
5.0% 2.723 3.546 4.329 5.076 53.5% 1.352 1.532 1.650 1.726
5.5% 2.698 3.505 4.270 4.996 54.0% 1.345 1.523 1.638 1.713
6.0% 2.673 3.465 4.212 4.917 54.5% 1.337 1.513 1.626 1.700
6.5% 2.648 3.426 4.156 4.841 55.0% 1.330 1.503 1.615 1.687
7.0% 2.624 3.387 4.100 4.767 55.5% 1.323 1.494 1.604 1.674
7.5% 2.601 3.349 4.046 4.694 56.0% 1.315 1.484 1.592 1.662
8.0% 2.577 3.312 3.993 4.623 56.5% 1.308 1.475 1.581 1.649
8.5% 2.554 3.276 3.941 4.554 57.0% 1.301 1.466 1.570 1.637
9.0% 2.531 3.240 3.890 4.486 57.5% 1.294 1.457 1.560 1.625
9.5% 2.509 3.204 3.840 4.420 58.0% 1.287 1.447 1.549 1.613
10.0% 2.487 3.170 3.791 4.355 58.5% 1.280 1.439 1.539 1.602
10.5% 2.465 3.136 3.743 4.292 59.0% 1.273 1.430 1.528 1.590
11.0% 2.444 3.102 3.696 4.231 59.5% 1.266 1.421 1.518 1.579
11.5% 2.423 3.070 3.650 4.170 60.0% 1.260 1.412 1.508 1.567
12.0% 2.402 3.037 3.605 4.111 60.5% 1.253 1.404 1.498 1.556
12.5% 2.381 3.006 3.561 4.054 61.0% 1.247 1.395 1.488 1.545
13.0% 2.361 2.974 3.517 3.998 61.5% 1.240 1.387 1.478 1.534
13.5% 2.341 2.944 3.475 3.943 62.0% 1.234 1.379 1.468 1.524
14.0% 2.322 2.914 3.433 3.889 62.5% 1.227 1.371 1.459 1.513
14.5% 2.302 2.884 3.392 3.836 63.0% 1.221 1.362 1.449 1.503
15.0% 2.283 2.855 3.352 3.784 63.5% 1.214 1.354 1.440 1.492
15.5% 2.264 2.826 3.313 3.734 64.0% 1.208 1.347 1.431 1.482
16.0% 2.246 2.798 3.274 3.685 64.5% 1.202 1.339 1.422 1.472
16.5% 2.228 2.770 3.236 3.636 65.0% 1.196 1.331 1.413 1.462
17.0% 2.210 2.743 3.199 3.589 65.5% 1.190 1.323 1.404 1.452
17.5% 2.192 2.716 3.163 3.543 66.0% 1.184 1.316 1.395 1.443
18.0% 2.174 2.690 3.127 3.498 66.5% 1.178 1.308 1.386 1.433
18.5% 2.157 2.664 3.092 3.453 67.0% 1.172 1.301 1.378 1.424
19.0% 2.140 2.639 3.058 3.410 67.5% 1.166 1.293 1.369 1.414
19.5% 2.123 2.613 3.024 3.367 68.0% 1.160 1.286 1.361 1.405
20.0% 2.106 2.589 2.991 3.326 68.5% 1.155 1.279 1.352 1.396
20.5% 2.090 2.564 2.958 3.285 69.0% 1.149 1.272 1.344 1.387
21.0% 2.074 2.540 2.926 3.245 69.5% 1.143 1.265 1.336 1.378
21.5% 2.058 2.517 2.895 3.205 70.0% 1.138 1.258 1.328 1.369
22.0% 2.042 2.494 2.864 3.167 70.5% 1.132 1.251 1.320 1.361
22.5% 2.027 2.471 2.833 3.129 71.0% 1.127 1.244 1.312 1.352
23.0% 2.011 2.448 2.803 3.092 71.5% 1.121 1.237 1.304 1.344
23.5% 1.996 2.426 2.774 3.056 72.0% 1.116 1.230 1.297 1.335
24.0% 1.981 2.404 2.745 3.020 72.5% 1.111 1.224 1.289 1.327
24.5% 1.967 2.383 2.717 2.986 73.0% 1.105 1.217 1.281 1.319
25.0% 1.952 2.362 2.689 2.951 73.5% 1.100 1.210 1.274 1.311
25.5% 1.938 2.341 2.662 2.918 74.0% 1.095 1.204 1.267 1.303
26.0% 1.923 2.320 2.635 2.885 74.5% 1.090 1.198 1.259 1.295
26.5% 1.909 2.300 2.609 2.853 75.0% 1.085 1.191 1.252 1.287
27.0% 1.896 2.280 2.583 2.821 75.5% 1.079 1.185 1.245 1.279
27.5% 1.882 2.260 2.557 2.790 76.0% 1.074 1.179 1.238 1.272
28.0% 1.868 2.241 2.532 2.759 76.5% 1.069 1.172 1.231 1.264
28.5% 1.855 2.222 2.507 2.729 77.0% 1.064 1.166 1.224 1.256
29.0% 1.842 2.203 2.483 2.700 77.5% 1.060 1.160 1.217 1.249
29.5% 1.829 2.185 2.459 2.671 78.0% 1.055 1.154 1.210 1.242
30.0% 1.816 2.166 2.436 2.643 78.5% 1.050 1.148 1.204 1.235
30.5% 1.803 2.148 2.412 2.615 79.0% 1.045 1.143 1.197 1.227
31.0% 1.791 2.130 2.390 2.588 79.5% 1.040 1.137 1.190 1.220
31.5% 1.779 2.113 2.367 2.561 80.0% 1.036 1.131 1.184 1.213
32.0% 1.766 2.096 2.345 2.534 80.5% 1.031 1.125 1.177 1.206
32.5% 1.754 2.079 2.324 2.508 81.0% 1.026 1.120 1.171 1.199
33.0% 1.742 2.062 2.302 2.483 81.5% 1.022 1.114 1.165 1.193
33.5% 1.730 2.045 2.281 2.458 82.0% 1.017 1.108 1.158 1.186
34.0% 1.719 2.029 2.260 2.433 82.5% 1.013 1.103 1.152 1.179
34.5% 1.707 2.013 2.240 2.409 83.0% 1.008 1.097 1.146 1.173
35.0% 1.696 1.997 2.220 2.385 83.5% 1.004 1.092 1.140 1.166
35.5% 1.685 1.981 2.200 2.362 84.0% 0.999 1.087 1.134 1.160
36.0% 1.673 1.966 2.181 2.339 84.5% 0.995 1.081 1.128 1.153
36.5% 1.662 1.951 2.162 2.316 85.0% 0.991 1.076 1.122 1.147
37.0% 1.652 1.935 2.143 2.294 85.5% 0.986 1.071 1.116 1.141
37.5% 1.641 1.921 2.124 2.272 86.0% 0.982 1.066 1.111 1.135
38.0% 1.630 1.906 2.106 2.251 86.5% 0.978 1.061 1.105 1.129
38.5% 1.620 1.892 2.088 2.229 87.0% 0.974 1.055 1.099 1.123
39.0% 1.609 1.877 2.070 2.209 87.5% 0.969 1.050 1.094 1.117
39.5% 1.599 1.863 2.052 2.188 88.0% 0.965 1.045 1.088 1.111
40.0% 1.589 1.849 2.035 2.168 88.5% 0.961 1.040 1.082 1.105
40.5% 1.579 1.836 2.018 2.148 89.0% 0.957 1.036 1.077 1.099
41.0% 1.569 1.822 2.001 2.129 89.5% 0.953 1.031 1.072 1.093
41.5% 1.559 1.809 1.985 2.109 90.0% 0.949 1.026 1.066 1.087
42.0% 1.549 1.795 1.969 2.091 90.5% 0.945 1.021 1.061 1.082
42.5% 1.540 1.782 1.953 2.072 91.0% 0.941 1.016 1.056 1.076
43.0% 1.530 1.769 1.937 2.054 91.5% 0.937 1.012 1.050 1.071
43.5% 1.521 1.757 1.921 2.036 92.0% 0.933 1.007 1.045 1.065
44.0% 1.512 1.744 1.906 2.018 92.5% 0.930 1.002 1.040 1.060
44.5% 1.502 1.732 1.890 2.000 93.0% 0.926 0.998 1.035 1.054
45.0% 1.493 1.720 1.876 1.983 93.5% 0.922 0.993 1.030 1.049
45.5% 1.484 1.707 1.861 1.966 94.0% 0.918 0.989 1.025 1.044
46.0% 1.475 1.695 1.846 1.949 94.5% 0.914 0.984 1.020 1.039
46.5% 1.467 1.684 1.832 1.933 95.0% 0.911 0.980 1.015 1.033
47.0% 1.458 1.672 1.818 1.917 95.5% 0.907 0.975 1.010 1.028
47.5% 1.449 1.660 1.804 1.901 96.0% 0.903 0.971 1.006 1.023
48.0% 1.441 1.649 1.790 1.885 96.5% 0.900 0.967 1.001 1.018
48.5% 1.432 1.638 1.776 1.870 97.0% 0.896 0.962 0.996 1.013
49.0% 1.424 1.627 1.763 1.854 97.5% 0.893 0.958 0.992 1.008
49.5% 1.416 1.616 1.750 1.839 98.0% 0.889 0.954 0.987 1.003
50.0% 1.407 1.605 1.737 1.824 98.5% 0.885 0.950 0.982 0.999
99.0% 0.882 0.946 0.978 0.994
99.5% 0.878 0.942 0.973 0.989
100.0% 0.875 0.938 0.969 0.984

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