To determine the appropriate discount factors using tables

Reference no: EM13599009

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 $95,000. The manufacturer estimates that the machine would be usable for six years but would require the replacement of several key parts at the end of the sixth year. These parts would cost $6,700, including installation. After six years, the machine could be sold for $6,400.

The company estimates that the cost to operate the machine will be $13,500 per year. The present method of dipping chocolates costs $43,000 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 $0.4 per box. A 9% rate of return is required on all investments. (Ignore income taxes.)

To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B-1 and Exhibit 12B-2. Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) decimal places before using the factor in the problem.

What are the annual net cash inflows that will be provided by the new dipping machine?
Compute the new machine's net present value. Use the incremental cost approach.

Reference no: EM13599009

Questions Cloud

Lexis company purchased equipment on janu 1 2012 for 35000 : lexis company purchased equipment on janu 1 2012 for 35000 the estimated useful life of the equipment was 7 years and

In addition jose incurred the following expenses before : jose purchased a delivery van for his business through an online auction. his winning bid for the van was 37500. in

Suppose that while melissa was on the coast she also spent : a. melissa recently paid 775 for round-trip airfare to san francisco to attend a business conference for three days.

On august 1 2013 250000 of bonds were turned in for : volker inc. issued 2500000 of convertible 10-year bonds on july 1 2012. the bonds provide for 12 interest payable

To determine the appropriate discount factors using tables : the sweetwater candy company would like to buy a new machine that would automatically dip chocolates. the dipping

Tranter inc is considering a project that would have a : tranter inc. is considering a project that would have a ten-year life and would require a 1200000 investment in

Sue the corporate controller has thus far been impressed : sue the corporate controller has thus far been impressed with your performance at the charlotte plant. she thinks it is

Smothers wood company is in the process of selecting cost : smothers wood company is in the process of selecting cost drivers that could be used as the basis for allocating

Sanilac county has a lease on a lawn mower for 2500 per : sanilac county has a lease on a lawn mower for 2500 per month and .02 per minute of operation. operating costs for fuel

User Account

All Pages