1. What are the annual net cash inflows provided by the new dipping machine? 2. Compute the new machine's net present value.
1. What are the annual net cash inflows provided by the new dipping machine? 2. Compute the new machine's net present value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 14-22 (Algo) Net Present Value Analysis [LO14-2]
The Sweetwater Candy Company would like to buy a new machine for $210,000 that automatically "dips" chocolates. The
manufacturer estimates the machine would be usable for five years but would require replacement of several key parts costing
$11,300 at the end of the third year. After five years, the machine could be sold for $6,000.
The company estimates the cost to operate the machine will be $9,300 per year. The present labor-intensive method of dipping
chocolates costs $53,000 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 $1.65 per box. A 19% rate of return is required on all investments.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. What are the annual net cash inflows provided by the new dipping machine?
2. Compute the new machine's net present value.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What are the annual net cash inflows provided by the new dipping machine?
Total annual net cash inflows
< Required 1
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffc6b3292-544f-431f-ac6e-443381875618%2F1981a760-8f6b-48e6-bca2-5d0b265d8d2a%2Fn7o3qg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 14-22 (Algo) Net Present Value Analysis [LO14-2]
The Sweetwater Candy Company would like to buy a new machine for $210,000 that automatically "dips" chocolates. The
manufacturer estimates the machine would be usable for five years but would require replacement of several key parts costing
$11,300 at the end of the third year. After five years, the machine could be sold for $6,000.
The company estimates the cost to operate the machine will be $9,300 per year. The present labor-intensive method of dipping
chocolates costs $53,000 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 $1.65 per box. A 19% rate of return is required on all investments.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. What are the annual net cash inflows provided by the new dipping machine?
2. Compute the new machine's net present value.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What are the annual net cash inflows provided by the new dipping machine?
Total annual net cash inflows
< Required 1
Required 2 >
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