Capital Decision Making 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 $1,800. The machine should be usable for 3 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 $.80 per can would win him good will. 5 What is the estimated annual sales in cans of soda? 6 2,000 cans (17.01) 17 58 39 What is the contribution margin per can of soda? (rounded to two places, S 46 47 48 (17.02) 49 50 57 How many cans of soda must be sold each year to breakeven? (Round up to zero places, cans) 58 59 00 01 (17.03) 68 Annual incremental cash inflows from the soda machine? (rounded to two places, S 79 828 What is the payback period in years? (rounded to two places, # years) 90 91 92 993 94 101 (17.04) (17.05) 102 103 If the time value of money is 12% per year what is the net present value? Use the tables on page 18 104 105 31 100 107 108 100 (17.06) 32 110 111 What is the internal rate of return. Pick the closest interest rate from the tables on page 18 112 83 113 114 115 116 84 117 118 (17.07)