PART 7 Capital Decision Making Big Al gives his worker's a one hour lunch and two fifteen minute breaks each day. He believes that a cold soda machine would be appreciated by his workers, and an appreciated worker is a good worker. He has priced a machine at a national member only warehouse for $2,200. The machine should be usable for 6 years, after which it would be inefficient, obsolete and would have to be disposed of at the dump. Big Al believes that 9 cans a day will be purchased. The plant is open five days a week, 50 weeks per year. A case of soda (24 cans) costs $5.76 and Big Al believes that a price of $.85 per can would win him good will. What is the estimated annual sales in cans of soda? 2,250 cans {17.01} What is the contribution margin per can of soda? (rounded to two places, $#.#) 0.61 {17.02} How many cans of soda must be sold each year to breakeven? (Round up to zero places, #####cans) 601 cans {17.03} Annual incremental cash inflows from the soda machine? (rounded to two places, $#.#) $ 1,372.50 {17.04} Annual incremental cash inflows from the soda machine? (rounded to two places, $#.#) 1,372.50 {17.04} What is the payback period in years? (rounded to two places, #.##years) 1.60 years {17.05} If the time value of money is 12% per year what is the net present value? Use the tables on page 18. {17.06} What is the internal rate of return. Pick the closest interest rate from the tables on page 18. {17.07} Present Value of Annuity $1.00 in Arrears Interest Periods Interest Periods 3 2.884 2.856 4 3.808 3.762 3.717 3.673 3.630 3.588 3.546 3.505 3.465 3.426 3.387 3.349 3.312 3.276 3.240 3.204 3.170 3.136 Rate 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% 15.5% 16.0% 16.5% 17.0% 17.5% 18.0% 18.5% 19.0% 19.5% 20.0% 20.5% 21.0% 21.5% 22.0% 22.5% 23.0% 23.5% 24.0% 24.5% 25.0% 25.5% 26.0% 26.5% 2.829 2.802 2.775 2.749 2.723 2.698 2.673 2.648 2.624 2.601 2.577 2.554 2.531 2.509 2.487 2.465 2.444 2.423 2.402 2.381 2.361 2.341 2.322 2.302 2.283 2.264 2.246 2.228 2.210 2.192 2.174 2.157 2.140 2.123 2.106 2.090 2.074 2.058 2.042 2.027 2.011 1.996 1.981 3.102 3.070 3.037 3.006 2.974 2.944 2.914 2.884 2.855 2.826 2.798 2.770 2.743 2.716 2.690 2.664 2.639 2.613 2.589 2.564 2.540 2.517 2.494 2.471 2.448 2.426 2.404 2.383 2.362 2.341 2.320 2.300 5 4.713 4.646 4.580 4.515 4.452 4.390 4.329 4.270 4.212 4.156 4.100 4.046 3.993 3.941 3.890 3.840 3.791 3.743 3.696 3.650 3.605 3.561 3.517 3.475 3.433 3.392 3.352 3.313 3.274 3.236 3.199 3.163 3.127 3.092 3.058 3.024 2.991 2.958 2.926 2.895 2.864 2.833 2.803 2.774 2.745 2.717 2.689 2.662 2.635 2.609 6 5.601 5.508 5.417 5.329 5.242 5.158 5.076 4.996 4.917 4.841 4.767 4.694 4.623 4.554 4.486 4.420 4.355 4.292 4.231 4.170 4.111 4.054 3.998 3.943 3.889 3.836 3.784 3.734 3.685 3.636 3.589 3.543 3.498 3.453 3.410 3.367 3.326 3.285 3.245 3.205 3.167 3.129 3.092 3.056 3.020 2.986 2.951 2.918 2.885 2.853 Rate 50.5% 51.0% 51.5% 52.0% 52.5% 53.0% 53.5% 54.0% 54.5% 55.0% 55.5% 56.0% 56.5% 57.0% 57.5% 58.0% 58.5% 59.0% 59.5% 60.0% 60.5% 61.0% 61.5% 62.0% 62.5% 63.0% 63.5% 64.0% 64.5% 65.0% 65.5% 66.0% 66.5% 67.0% 67.5% 68.0% 68.5% 69.0% 69.5% 70.0% 70.5% 71.0% 71.5% 72.0% 72.5% 73.0% 73.5% 74.0% 74.5% 75.0% 3 1.399 1.391 1.383 1.375 1.368 1.360 1.352 1.345 1.337 1.330 1.323 1.315 1.308 1.301 1.294 1.287 1.280 1.273 1.266 1.260 1.253 1.247 1.240 1.234 1.227 1.221 1.214 1.208 1.202 1.196 1.190 1.184 1.178 1.172 1.166 1.160 1.155 1.149 1.143 1.138 1.132 1.127 1.121 1.116 1.111 1.105 1.100 1.095 1.090 1.085 4 1.594 1.584 1.573 1.563 1.553 1.542 1.532 1.523 1.513 1.503 1.494 1.484 1.475 1.466 1.457 1.447 1.439 1.430 1.421 1.412 1.404 1.395 1.387 1.379 1.371 1.362 1.354 1.347 1.339 1.331 1.323 1.316 1.308 1.301 1.293 1.286 1.279 1.272 1.265 1.258 1.251 1.244 1.237 1.230 1.224 1.217 1.210 1.204 1.198 1.191 5 1.724 1.711 1.698 1.686 1.674 1.662 1.650 1.638 1.626 1.615 1.604 1.592 1.581 1.570 1.560 1.549 1.539 1.528 1.518 1.508 1.498 1.488 1.478 1.468 1.459 1.449 1.440 1.431 1.422 1.413 1.404 1.395 1.386 1.378 1.369 1.361 1.352 1.344 1.336 1.328 1.320 1.312 1.304 1.297 1.289 1.281 1.274 1.267 1.259 1.252 6 1.810 1.795 1.781 1.767 1.753 1.740 1.726 1.713 1.700 1.687 1.674 1.662 1.649 1.637 1.625 1.613 1.602 1.590 1.579 1.567 1.556 1.545 1.534 1.524 1.513 1.503 1.492 1.482 1.472 1.462 1.452 1.443 1.433 1.424 1.414 1.405 1.396 1.387 1.378 1.369 1.361 1.352 1.344 1.335 1.327 1.319 1.311 1.303 1.295 1.287 1.967 1.952 1.938 1.923 1.909 26.0% 26.5% 27.0% 27.5% 28.0% 28.5% 29.0% 29.5% 30.0% 30.5% 31.0% 31.5% 32.0% 32.5% 33.0% 33.5% 34.0% 34.5% 35.0% 35.5% 36.0% 36.5% 37.0% 37.5% 38.0% 38.5% 39.0% 39.5% 40.0% 40.5% 41.0% 41.5% 42.0% 42.5% 43.0% 43.5% 44.0% 44.5% 45.0% 45.5% 46.0% 46.5% 47.0% 47.5% 48.0% 48.5% 49.0% 49.5% 50.0% 1.923 1.909 1.896 1.882 1.868 1.855 1.842 1.829 1816 1.803 1791 1.779 1766 1.754 1742 1.730 1.719 1.707 1.696 1.685 1.673 1.662 1.652 1.641 1.630 1.620 1.609 1.599 1.589 1.579 1.569 1.559 1.549 1.540 1.530 1.521 1512 1.502 1.493 1.484 1.475 1467 1458 1449 1.441 14.32 1.424 1.416 1407 2.320 2.300 2280 2260 2241 2222 2203 2.185 2.166 2148 2.130 2113 2096 2079 2.062 2045 2.029 2013 1997 1981 1966 1951 1935 1.921 1.906 1.892 1.877 1.863 1.849 1.836 1.822 1.809 1.795 1782 1.769 1.757 1744 1.732 1.720 1.707 1.695 1.684 1.672 1.660 1.649 1.638 1.627 1.616 1.605 2.635 2.609 2583 2557 2532 2507 2.483 2459 2436 2412 2.390 2.367 2345 2324 2.302 2281 2260 2.240 2220 2200 2181 2.162 2.143 2.124 2.106 2088 2.070 2.052 2.035 2018 2001 1.985 1.969 1953 1937 1921 1.906 1.890 1.876 1.861 1.846 1.832 1.818 1.804 1.790 1.776 1.763 1.750 1.737 2885 2.853 2821 2790 2759 2729 2700 2.671 2643 2615 258 2.561 2534 2.508 2.483 2.458 2433 2409 2.385 2.362 2339 2.316 2.294 2272 2.251 2229 2209 2.188 2.168 2.148 2.129 2109 2.091 2.072 2054 2036 2018 2.000 1.983 1.966 1949 1933 1.917 1901 1.885 1.870 1.854 1.839 1.824 74.5% 75.0% 75.5% 76.0% 76.5% 77.0% 77.5% 78.0% 78.5% 79.0% 79.5% 80.0% 80.5% 81.0% 81.5% 82.0% 82.5% 83.0% 83.5% 84.0% 84.5% 85.0% 85.5% 86.0% 86.5% 87.0% 87.5% 8.0% 8.5% 89.0% 89.5% 90.0% 90.5% 91.0% 91.5% 92.0% 92.5% 93.0% 93.5% 94.06 94.5% 95.0% 95.5% 6.0% 96.5% 7.0% 97.5% 98.0% 98.5%|| 99.0% 99.5% 100.0% 1.090 1.085 1.079 1.074 1.069 1.064 1060 1.055 1.050 1.045 1.040 1.036 1.031 1.026 1.022 1.017 1013 1.008 1.004 0999 0995 0991 0986 0.982 0978 0974 0969 0965 0.961 0.957 0953 0949 0945 0941 0937 0933 0.930 0926 0922 0918 0914 0911 0907 0903 0.900 0.896 0.893 0.889 0.885 0.882 0.878 0.875 1.198 1.191 1.185 1.179 1.172 1.166 1.160 1.154 1.148 1.143 1.137 1.131 1.125 1.120 1.114 1.108 1.103 1.097 1.092 1.087 1.081 1.076 1.071 1.066 1.061 1.055 1.050 1.045 1.040 1036 1.031 1.026 1.021 1.016 1012 1.007 1.002 0.998 0993 0989 0984 0980 0975 0971 0.967 0962 0.958 0954 0.950 0946 0.942 0938 1259 1252 1245 1238 1231 1224 1.217 1210 1204 1.197 1.190 1.184 1.177 1.171 1.165 1.158 1.152 1.146 1.140 1.134 1.128 1.122 1.16 1.111 1.105 1.099 1.094 1.088 1.082 1.077 1.072 1.066 1.061 1.056 1.050 1.045 1040 1.035 1.030 1.025 1.020 1.015 1010 1.006 1.001 0996 0992 0.987 0982 0978 0973 0.969 1.295 1287 1279 1272 1264 1256 1.249 1242 1.235 1227 1220 1213 1206 1109 1.193 1.186 1.179 1.173 1.166 1.160 1.153 1.147 1.141 1.135 1.129 1.123 1.117 1.111 1.105 1.099 1.093 1.087 1.082 1.076 1.071 1.065 1060 1.054 1.049 1.044 1039 1.033 1.028 1.023 1.018 1013 1.008 1.003 0.999 0.994 0.989 0.984 If off the chart use 100%