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Wendell's Donut Shoppe is investigating the purchase of an $ 3 4 , 6 0 0 donut - making machine with a six - year
Wendell's Donut Shoppe is investigating the purchase of an $ donutmaking machine with a sixyear useful life. The new
machine would reduce labor costs by $ per year. In addition, it 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.
Click here to view Exhibit B and Exhibit B to determine the appropriate discount factors using tables.
Required:
What are the new machine's total annual cash inflows?
What discount factor should be used to compute the new machine's internal rate of return?
Note: Round your answer to decimal places.
What is the new machine's internal rate of return?
Note: Round your final answer to the nearest whole percentage.
In addition to the data given previously, assume the machine will have a $ 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.
Note: Round your final answer to the nearest whole percentage.
Answer is not complete.
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