Kk.313. Wendell's Donut Shoppe is investigating the purchase of a new $33,000 donut-making machine. The new machine would permit thecompany to reduce the amount of part-time help needed, at a cost savings of $5,700 per year. In addition, the new machine wouldallow the company to produce one new style of donut, resulting in the sale of 1,100 dozen more donuts each year. The companyrealizes a contribution margin of $2.60 per dozen donuts sold. The new machine would have a six-year useful life.Click here to view Exhibit 14B-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables.Required:1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes?2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimalplaces.)3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.)4. In addition to the data given previously, assume that the machine will have a $10,855 salvage value at the end of six years. Underthese conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find thediscount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest whole percentage.)1. Annual cash inflows2. Discount factor3. Internal rate of return4. Internal rate of return%%

Annual cash inflows is based on Annual savings in part time help and Added contribution margin on…

Wendell's Donut Shoppe is investigating the purchase of a new $33,000 donut-making machine. The new machine would per company to reduce the amount of part-time help needed, at a cost savings of $5,700 per year. In addition, the new machine v allow the company to produce one new style of donut, resulting in the sale of 1,100 dozen more donuts each year. The compa realizes a contribution margin of $2.60 per dozen donuts sold. The new machine would have a six-year useful life. CI to AR-1 factorie) ng tables

Wendell's Donut Shoppe is investigating the purchase of a new $33,000 donut-making machine. The new machine would per company to reduce the amount of part-time help needed, at a cost savings of $5,700 per year. In addition, the new machine v allow the company to produce one new style of donut, resulting in the sale of 1,100 dozen more donuts each year. The compa realizes a contribution margin of $2.60 per dozen donuts sold. The new machine would have a six-year useful life. CI to AR-1 factorie) ng tables

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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