Question
Capital Decision Making NEED ANSWER FOR BOLDED QUESTIONS Big Al gives his worker's a one hour lunch and two fifteen minute breaks each day. He
Capital Decision Making |
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| NEED ANSWER FOR BOLDED QUESTIONS |
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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 appreciated by his workers, and an appreciated worker is a good worker. | |||||||||
He has priced a machine at a national member only warehouse for $2,100. 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 11 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 $5.52 and Big Al believes that a price of $.75 per | |||||||||
can would win him good will. |
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| What is the estimated annual sales in cans of soda? |
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| 2,750 cans |
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| What is the contribution margin per can of soda? (rounded to two places, $#.##) |
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| $ 0.52 |
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| How many cans of soda must be sold each year to breakeven? (Round up to zero places, ###,### cans) |
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| 1,347 cans |
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| Annual incremental cash inflows from the soda machine? (rounded to two places, $#.##) |
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| $ 1,430.00 |
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| What is the payback period in years? (rounded to two places, #.## years) |
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| 2100/1430. |
| 1.47 years |
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| If the time value of money is 12% per year what is the net present value? Use the tables on page 18. |
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| 2.402 |
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| What is the internal rate of return. Pick the closest interest rate from the tables on page 18. |
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