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Izzy's Co., a manufacturer of cookies, is considering a new, energy efficient mixing machine for a cost of $100,000. Estimated service life of the machine
Izzy's Co., a manufacturer of cookies, is considering a new, energy efficient mixing machine for a cost of $100,000. Estimated service life of the machine is 15 years, at which time it could be sold for $5,000. Annual operating costs of the new machine are $5,000. The current machine costs $10,000 per year to operate. The new machine will also be able to manufacture a new type of cookie, from which the company estimates they can sell 10,000 cookies per year. The company's contribution margin is $2 per cookie. Company expects a 14% rate of return from all its investments. Present value interest factor Present value interest factor of an annuity Required: 15 years, 14% 0.140 6.142 Using the NPV method would you recommend that the company purchase the new machine
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