Question
Dog, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will
Dog, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $250,000. In addition, Austin estimates that the new machine will increase the company's annual net cash inflows by $40,800. The machine will have a 12-year useful life and salvage value of $10,000. Instructions (a) Calculate the machine's annual (accounting) rate of return. (b) Calculate the machine's net present value using a discount rate of 12%.
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