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Mr. B's Bakery is investigating the purchase of a new $63,000 convection oven. The new oven would permit the company to reduce the amount of
Mr. B's Bakery is investigating the purchase of a new $63,000 convection oven. The new oven would permit the company to reduce the amount of part-time help needed, at a cost savings of $11,400 per year. In addition, the new machine would allow the company to produce one new style of pastry, resulting in the sale of 1,000 dozen more pastries each year. Mr. B's realizes a contribution margin of $3.60 per dozen pastries sold. The new oven would have a six year useful life and no salvage value. Mr. B's required rate of return is 10%. Use the tables in #8 and #9 above to aid you in your calculations. 10) What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 11) Find the net present value of the project
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