Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Munch N Crunch Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $53,252.28 and could

Munch N Crunch Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $53,252.28 and could be used to deliver an additional 47,000 bags of pretzels per year. Each bag of pretzels can be sold for a contribution margin of $0.38. The delivery truck operating expenses, excluding depreciation, are $0.52 per mile for 16,000 miles per year. The bagging machine would replace an old bagging machine, and its net investment cost would be $54,765. The new machine would require three fewer hours of direct labor per day. Direct labor is $15 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have seven-year lives. The minimum rate of return is 9%. However, Munch N Crunch has funds to invest in only one of the projects.

Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.352 2.991
6 4.917 4.355 4.111 3.784 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192

a. Compute the internal rate of return for each investment. Use the above table of present value of an annuity of $1. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest percent.

Delivery Truck Bagging Machine
Present value factor
Internal rate of return % %

Third time asking this question. Please read the question fully and answer it fully as well. Thank you.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Reporting Und Behavioral Accounting Verhaltenswirkungen Des Berichtswesens Im Unternehmen

Authors: Andreas Taschner

2nd., 2nd. Auflage Aufl. 2019 Edition

3658234911, 978-3658234911

More Books

Students also viewed these Accounting questions

Question

Conduct an effective performance feedback session. page 360

Answered: 1 week ago