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Wendell's Donut Shoppe is investigating the purchase of an $33,000 donut-making machine with a six-year useful life. The new machine would reduce labor costs by
Wendell's Donut Shoppe is investigating the purchase of an $33,000 donut-making machine with a six-year useful life. The new machine would reduce labor costs by $5,700 per year, In addition, it would allow the company to produce one new style of donut. resulting in the sale of 1,100 dozen more donuts each year. The company realizes a contribution margin of $2.60 per dozen donuts sold. Click here to view Exhibit 148-1 and Exhibit 148.2. to determine the appropriate discount factor(s) using tables Required: 1. What are the new machine's total annual cash inflows? 2 What discount factor should be used to compute the new machine's internal rate of return? Note: Round your onswer to 3 decimal places. 3. What is the new machine's internal rate of return? Note: Round your final answer to the nearest whole percentage. 4. In addition to the data given previously, assume the machine will have a \$10,855 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
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