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Please help me to fill the blanks thanks! Rate = Interest rate, in this problem, .14 [14%] $ BELGI'S CHOCOLATES, INC. Cost of new machine
Please help me to fill the blanks thanks!
Rate = Interest rate, in this problem, .14 [14%]
$ BELGI'S CHOCOLATES, INC. Cost of new machine Life expectancy of new machine, in years Parts replacement costs at the end of year 6 Salvage value of new machine at the end of year 10 90,000 10 25,000 8,000 $ $ $ $ Annual operating costs of new machine Annual operating costs of current method ncreased production (boxes) per year Contribution margin per box Required return on investment 10,000 19,000 5,500 2.00 14% $ BELGI'S CHOCOLATES, INC. Net Annual Cash Inflows Provided by the New Dipping Machine Reduction in annual operating costs: Annual operating costs using current hand method Less: Annual operating costs of new machine = Annual savings in operating costs Plus: Increased annual contribution margin due to increased production with the new machine Total net annual cash inflows 19,000 10,000 9,000 $ 11,000 20,000 Correct! Net Present Value of the New Machine Year(s) PV of Cash Flows (90,000) now Amount of Cash Flows (90,000) (25,000) 20,000 8,000 Item Cost of the new machine Parts replacement costs end of 6th year Net annual cash inflows Salvage value of new machine Net present value 6 1-10 10 Using the general decision rule for the net present value method, should the management of the company accept this project? Indicate your answer by typing Yes or No in the cell to the right
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