Solution-Compute the new machine''s net present value

Compute the new machine''s net present value

Reference no: EM133147928

Question - The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation currently is done largely by hand. The machine the company is considering costs $170,000. The manufacturer estimates that the machine would be usable for five years but would require the replacement of several key parts at the end of the third year. These parts would cost $9,800, including installation. After five years, the machine could be sold for $6,000.

The company estimates that the cost to operate the machine will be $7,800 per year. The present method of dipping chocolates costs $38,000 per year. In addition to reducing costs, the new machine will increase production by 5,000 boxes of chocolates per year. The company realizes a contribution margin of $1.25 per box. A 16% rate of return is required on all investments.

Required -

1. What are the annual net cash inflows that will be provided by the new dipping machine?

2. Compute the new machine's net present value.

Reference no: EM133147928

Questions Cloud

Determine reba federal income taxes due : Determine Reba's federal income taxes due or taxes payable for the current year. Complete pages 1 and 2, Schedule 1, and Schedule 3

Start a restaurant in community : Franchising has been declared by many as the wave of the future. If you were going to start a restaurant in your community, would you be interested in buying a

Process to obtain government permission : Starting a business is more difficult in some countries than in others. In india, for example, it takes a time-consuming and bureaucratic process to obtain gove

Did the situation contribute to particular leader emergence : Select a recent crisis involving an organization or country, and analyze it in terms of the leader-follower-situation framework. For example, were the followers

Compute the new machine''s net present value : The company estimates that the cost to operate the machine will be $7,800 per year. Compute the new machine's net present value

Innovation activities-rasci model : There are many different activities for creating solutions identified in the Understand phase. The effectiveness of these activities depends on many factors, in

Identify product offered by manufacturer : Identify a product offered by a manufacturer, using a dual distribution approach. How do the purchase experiences differ?

Introduce the ebusiness by providing a brief history : For this assignment, you will research the following ebusiness: Walmart.com. The requirements for this assignment are listed below:

Embedding long-term wealth creation : The author of the article "Embedding Long-Term Wealth Creation in the Heart of the Enterprise" describes the notion of recognizing that long-term wealth creatio

User Account

All Pages

Compute the new machine''s net present value

Reference no: EM133147928

Reference no: EM133147928

Questions Cloud

Reviews

Write a Review

Accounting Basics Questions & Answers

Explain prospect theory

Prepare a statement of cash flows for the year ended

Determine the inventory turnover

Compute the depreciation on the tugboat

Determine the dollar value for ending inventory

You live in a town with 300 adults and 200 children and you

What rate of return is required to meet his goal

What amount should Phoenix report for Sedona customer list

Compute the amount of under- or overapplied overhead at

List three methods to measure cost behavior

Find what amount today is equivalent to be received

How do computer-assisted procedures impact this audit

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT