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Curtiss Coffee Company is considering purchasing a machine that will allow them to make decaffeinated coffee. The machine will cost $ 2 4 , 0
Curtiss Coffee Company is considering purchasing a machine that will allow them to make
decaffeinated coffee. The machine will cost $ and will have to be paid for at the time
of purchase. If the machine is purchased, then annual sales of decaffeinated coffee will be
$ in the first year and the annual sales will increase by $ each year. The
annual cash operating expenses will be $ in the first year and will increase by
$ each year. The machine will last for years. Ignore income taxes. Curtiss Coffee
Company has a required rate of return.
Requirements: Complete each requirement on a separate worksheet. Each requirement uses the
information in the above paragraph and is independent of the other requirements.
Create a timeline of the cash flows. Calculate the net present value and the internal rate of
return.
a At the end of years, the machine will be disposed of at a cost of $
b Should Curtiss Coffee buy the machine?
Create a timeline of the cash flows. Calculate the net present value of the machine.
a The machine will require maintenance at the end of year The cash cost of the
maintenance will be $
b At the end of years, the machine will be disposed of at zero cost.
c Should Curtiss Coffee buy the machine?
Create a timeline of the cash flows. Calculate the modified internal rate of return.
a At the end of years, the machine will be sold for $
b The finance rate is
c The reinvestment rate is
d Should Curtiss Coffee buy the machine?
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