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$240,000. The manufacturer estimates that the machine would be usable for five years but would require thereplacement of several key parts at the end of the third year. These parts would cost $11,600, includinginstallation. After five years, the machine could be sold for $5,000.The company estimates that the cost to operate the machine will be $9,600 per year. The present methodof dipping chocolates costs $56,000 per year. In addition to reducing costs, the new machine will increaseproduction by 3,000 boxes of chocolates per year. The company realizes a contribution margin of $1.80 perbox. A 13% rate of return is required on all investments.Use Excel or spreadsheet to solve. Round answers to the nearest dollar.Required:1. What are the annual net cash inflows that will be provided by the new dipping machine?Reduction in annual operating costs:Operating costs, present hand methodOperating costs, new machineAnnual savings in operating costsIncreased annual contribution marginTotal annual net cash inflovws2$2. Compute the new machine's net present value. (Any cash outflows should be indicated by a minussign. Round final answers to the nearest whole dollar amount.)Now234Purchase of machineAnnual net cash inflowsReplacement partsSalvage value of machineTotal cash flows$2$2$이 $이 $이 $Net present value

1: Computation of net annual cash inflows by new dipping machine - Sweetwater Candy Company…

1. What are the annual net cash inflows that will be provided by the new dipping machine? Reduction in annual operating costs: Operating costs, present hand method Operating costs, new machine Annual savings in operating costs Increased annual contribution margin Total annual net cash inflows 2. Compute the new machine's net present value. (Any cash outflows should be indicated by a minus

1. What are the annual net cash inflows that will be provided by the new dipping machine? Reduction in annual operating costs: Operating costs, present hand method Operating costs, new machine Annual savings in operating costs Increased annual contribution margin Total annual net cash inflows 2. Compute the new machine's net present value. (Any cash outflows should be indicated by a minus

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(b) Suppose that the allocation of a natural resource during three years results in a stream of total surplus value of $100 per period t (i.e.: t = 0; 1; 2). Obtain the present value of this stream when the discount rate is r = 0:10 and also when it is r = 0:05. Annuity amount (A) = $100 Time Period (n) = 3 years Discount rate (r) = 10% or 0.10 & 5% or 0.05 Present value of this stream when the discount rate is 10%: PVA = PV = A (P/A, r, n) PV = 100 (P/A, 0.10, 3) PV = 248.69 Present value of this stream when the discount rate is 5%: PVA = PV = A (P/A, r, n) PV = 100 (P/A, 0.5, 3) PV = 272.3 (c) Alternatively, the resource could be fully extracted now (say, in the period t = 0), resulting in a total surplus $280 at t = 0 and 0 in every future period. Is this immediate extraction strategy preferred to the extraction strategy described in (a) when r = 0:10? What about when r = 0:05? What does this tell us about the intuitive meaning of discounting regarding intertemporal…
Accounting Question
Consider an uneven cash flow stream: Year Cash Flow 0 $2,000 1 $2,000 2 $0 3 $1,500 4 $2,500 5 $4,000 What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually? What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)
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H3. Account
Calculate cash flows.
es McCann Co. has identified an investment project with the following cash flows. Year 1 234 a. If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 16 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Cash Flow $820 1,130 1,390 1,525 b. C. Present value at 10% Present value at 16% Present value at 25%
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Subject: acounting
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