The sweetwater candy company would like to buy a new

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Reference no: EM13595781

The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $125,000. The manufacturer estimates that the machine would be usable for 10 years. After 10 years, the machine could be sold for $7,500.

The company estimates that the cost to operate the machine will be $7,000 per year. The present method of dipping chocolates costs $30,000 per year. In addition to reducing costs, the new machine will increase production by 6,000 boxes of chocolates per year. The company realizes a contribution margin of $1.50 per box. A 20% rate of return is required on all investments. (Ignore income taxes.)

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

-Compute the new machine's net present value

Reference no: EM13595781

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