Homework Help is Here – Start Your Trial Now!
Business
Accounting
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 $102,000. The manufacturer estimates that the machine would be usable for 12 years, but would require the replacement of several key parts at the end of the Sixth year. These pan would cost $9,000, including installation. After 12 years, the machine could be sold for about $7,500. The company estimates that the cost to operate the machine will be only $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. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1 What are the net annual cash inflows that will be provided by the new dipping machine?

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 $102,000. The manufacturer estimates that the machine would be usable for 12 years, but would require the replacement of several key parts at the end of the Sixth year. These pan would cost $9,000, including installation. After 12 years, the machine could be sold for about $7,500. The company estimates that the cost to operate the machine will be only $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. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1 What are the net annual cash inflows that will be provided by the new dipping machine?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

1

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 $102,000. The manufacturer estimates that the machine would be usable for 12 years, but would require the replacement of several key parts at the end of the sixth year. These parts would cost $9,000, including installation. After 12 years, the machine could be sold for about $7,500. The company estimates that the cost to operate the machine will be only $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. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the net annual cash inflows that will be provided by the new dipping machine? Net annual cash inflow 2. Compute the new machine's net present value using the incremental cost approach. (Round discount factor(s) to 3 decimal places.) Net present value
Transcribed Image Text: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 $102,000. The manufacturer estimates that the machine would be usable for 12 years, but would require the replacement of several key parts at the end of the sixth year. These parts would cost $9,000, including installation. After 12 years, the machine could be sold for about $7,500. The company estimates that the cost to operate the machine will be only $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. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the net annual cash inflows that will be provided by the new dipping machine? Net annual cash inflow 2. Compute the new machine's net present value using the incremental cost approach. (Round discount factor(s) to 3 decimal places.) Net present value
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Financial Reporting in Hyperinflationary Economies
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS