Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help! Wendell's Donut Shoppe is investigating the purchase of a new $47,300 donut-making machine. The new machine would permit the company to reduce the

please help! image text in transcribed
Wendell's Donut Shoppe is investigating the purchase of a new $47,300 donut-making machine. The new machine would permit the company to reduce the amount of parttime heip needed, at a cost savings of $6,300 per year In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,600 dozen more donuts each year. The company realizes a contribution margin of $1.50 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 1481 and Exhibit 148-2. to determine the appropriate discount factor(5) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2 What discount factor should be used to compute the new machine's intemal rate of return? (Round your onswers to 3 decimal ploces.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $13,605 salvage value at the end of sox years. Under these conditions. what is the internal rate of return? (Hint. You may find it helpful to use the net present value approach, find the discount rate that wil cause the net present value to be closest to zero). (Round your final answer to the nearest whole percentage.)

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

More Books

Students also viewed these Accounting questions

Question

Ensure continued excellence in people management.

Answered: 1 week ago

Question

Enhance the international team by recruiting the best people.

Answered: 1 week ago