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Hh2).
![Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the
company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would
allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company
realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life.
Click here to view Exhibit 148-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Round your final
answer to the nearest whole dollar amount.)
2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal
places.)
3. What is the new machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
4. In addition to the data given previously, assume that the machine will have a $9,125 salvage value at the end of six years. Under
these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the
discount rate that will cause the net present value to be closest to zero.) (Round your answer to the nearest whole percentage, i.e.
0.123 should be considered as 12%.)
1. Annual cash inflows
2. Discount factor
3. Internal rate of return
4. Internal rate of return
S
5,000
(18,600.000)
16
22
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41e793dc-c741-4e94-bcd3-a298f99ad349%2F3a07f292-5b4a-4a94-a031-2af87dbe5c4b%2F6rgiaq9_processed.jpeg&w=3840&q=75)
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- Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Round your final answer to the nearest whole dollar amount.) 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your answer to…Wendell’s Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Round your final answer to the nearest whole dollar amount.) 2. What discount factor should be used to compute the new machine’s internal rate of return? (Round your answer to 3 decimal places.) 3. What is the new machine’s internal rate of return? (Round your final…
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