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Wendell's Donut Shoppe is investigating the purchase of a new $ 3 3 , 0 0 0 donut - making machine. The new machine would
Wendell's Donut Shoppe is investigating the purchase of a new $ donutmaking machine. The new machine would permit the
company to reduce the amount of parttime help needed, at a cost savings of $ per year. In addition, the new machine would
allow the company to produce one new style of donut, resulting in the sale of dozen more donuts each year. The company
realizes a contribution margin of $ per dozen donuts sold. The new machine would have a sixyear useful life.
Click here to view Exhibit B and Exhibit B to determine the appropriate discount factors 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 decimal
places.
What is the new machine's internal rate of return? Round your final answer to the nearest whole percentage.
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