Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Sweetwater Candy Company would like to buy a new machine that would automatically dip chocolates. The dipping operation currently is done largely by hand.

image text in transcribed
image text in transcribed
The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation currently is done largely by hand. The machine the company is considering costs $110,000. The manufacturer estimates that the machine would be usable for five years but would require the replacement of several key parts at the end of the third year. These parts would cost $9.200, including installation. After five years, the machine could be sold for $5,000. The company estimates that the cost to operate the machine will be $7,200 per year. The present method of dipping chocolates costs $32,000 per year. In addition to reducing costs, the new machine will increase production by 4.000 boxes of chocolates per year. The company realizes a contribution margin of $0.95 per box A 18% rate of return is required on all investments. Click here to view Exhibit 138.1 and Exhibit 138-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the annual net cash inflows that will be provided by the new dipping machine? 2. Compute the new machine's net present value. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the new machine's net present value. (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) LULUI. www.MUALLILULUI. Click here to view Exhibit 138-1 and Exhibit 138-2. to determine the appropriate discount factor(s) using tables. Required: 1. What are the annual net cash inflows that will be provided by the new dipping machine? 2. Compute the new machine's net present value Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the new machine's net present value. (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present Ivalue s (24,422) Required 1

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

Contemporary Auditing Real Issues And Cases

Authors: Michael C. Knapp

8th Edition

0538466790, 9780538466790

More Books

Students also viewed these Accounting questions