Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of
Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 1381 and Exhibit 138-2. to determine the appropriate discount factorfs) using tables Required . What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Round your fina answer to the nearest whole dollar amount.) 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decima places.) 3. What is the new machine's internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 1296) 4. In addition to the data given previously, assume that the machine will have a $9,125 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Round your answer to whole decimal place i.e.0.123 should be considered as 1296) 1. Annual cash inflows 2. Discount factor 3. Internal rate of return 4. Internal rate of return
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started