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Wendell's Donut Shoppe is investigating the purchase of a new $52,100 donut-making machine. The new machine would permit the company to reduce the amount
Wendell's Donut Shoppe is investigating the purchase of a new $52,100 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,100 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,800 dozen more donuts each year. The company realizes a contribution margin of $1.70 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) 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 internal rate of refurn? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 1. Annual cash inflows 2. Discount factor i 3. Internal rate of retur %
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