Wendell’s Donut Shoppe is investigating the purchase of a new $40,000 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,200 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,000 dozen more donuts each year. The company realizes a contribution margin of $2.40 per dozen donuts sold. The new machine would have a six-year useful life. Required: 4. In addition to the data given previously, assume that the machine will have a $10,515 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 final answer to the nearest whole percenta
Wendell’s Donut Shoppe is investigating the purchase of a new $40,000 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,200 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,000 dozen more donuts each year. The company realizes a contribution margin of $2.40 per dozen donuts sold. The new machine would have a six-year useful life.
Required:
4. In addition to the data given previously, assume that the machine will have a $10,515 salvage value at the end of six years. Under these conditions, what is the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
