Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Fantastic Candy Company is considering purchasing a second chocolate dipping machine in order to expand its business. The information Fantastic has accumulated regarding the new
Fantastic Candy Company is considering purchasing a second chocolate dipping machine in order to expand its business. The information Fantastic has accumulated regarding the new machine is: (Click the icon to view the information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate the following for the new machine: X r parentheses i Data Table a. WH nea X i Requirements TIL Cost of the machine $125,000 1. $25,000 Increased annual contribution margin Life of the machine Required rate of return 10 years 12% Calculate the following for the new machine: a. Net present value b. Payback period C. Discounted payback period d. Internal rate of return (using the interpolation method) e. Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation) What other factors should Fantastic Candy consider in deciding whether to purchase the new machine? Fantastic estimates it will be able to produce more candy using the second machine and thus increase its annual contribution margin. It also estimates there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers. Assume all cash flows occur at year-end except for initial investment amounts. 2. Print Done Print Done
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started