Wendell's Donut Shoppe is investigating the purchase of a new $42.900 donut-making machine. The new machine would permit

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Wendell S Donut Shoppe Is Investigating The Purchase Of A New 42 900 Donut Making Machine The New Machine Would Permit 1 (41.46 KiB) Viewed 44 times

Wendell's Donut Shoppe is investigating the purchase of a new $42.900 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,000 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 128-1 and Exhibit 128-2, 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 decimal places.) 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 $16,575 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.) (Round your final answer to the nearest whole percentage.) 1. Annual cash inflows 2. Discount factor 3. Intamal rate of return 4. Intamal rate of return % %