Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wendell's Donut Shoppe is investigating the purchase of a new $ 3 1 , 3 0 0 donut - making machine. The new machine would

Wendell's Donut Shoppe is investigating the purchase of a new $31,300 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,300 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,300 dozen more donuts each year. The company realizes a contribution margin of $3.00 per dozen donuts sold. The new machine would have a six-year useful life.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Required:
What would be the total annual cash inflows associated with the new machine for capital budgeting purposes?
What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.)
What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.)
In addition to the data given previously, assume that the machine will have a $12,820 salvage value at the end of six 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 will cause the net present value to be closest to zero.)(Round your final answer to the nearest whole percentage.)
\table[[1. Annual cash inflows,9,200,],[2. Discount factor,3.402,],[3. Intemal rate of retum,20,% STUCK PLS HELP .. PLS SHOW ALL STEPS TO #4 that one has me so stumped try to simplify as best as you can thank you!!!!
image text in transcribed

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

Economics, Accounting And The True Nature Of Capitalism Capitalis Ecology And Democracy

Authors: Jacques Richard, Alexandre Rambaud

1st Edition

1032046589, 9781032046587

More Books

Students also viewed these Accounting questions

Question

What is the cerebrum?

Answered: 1 week ago