Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 6 years. The new machine will cost $3,770 a year to operate, as opposed to the old machine, which costs $4,225 per year to operate. Also, because of increased capacity, an additional 21,700 donuts a year can be produced. The company makes a contribution margin of $0.10 per donut. The old machine can be sold for $8,700 and the new machine costs $31,700. The incremental annual : cash inflows provide by the new machine would be (Ignore income taxes.): Multiple Choice $455 $2,170 $6,530
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- Pisa Pizza Parlor is investigating the purchase of a new $45,000 delivery truck that would contain specially designed warming racks. Thenew truck would have a six-year useful life. It would save $5,400 per year over the present method of delivering pizzas. In addition, it would result in the sale of 1,800 more pizzas each year. The company realizes a contribution margin of $2 per pizza. Required: (Ignore income taxes.) 1. What would be the total annual cash inflows associated with the new truck for capital budgeting purposes? 2. Find the internal rate of return promised by the new truck to the nearest whole percent.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 percentage.)Munch N' Crunch Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $54,940.86 and could be used to deliver an additional 47,000 bags of pretzels per year. Each bag of pretzels can be sold for a contribution margin of $0.38. The delivery truck operating expenses,
- A salad oil bottling plant can either buy caps for the glass bottles at 5 cents each or install $500,000 worth of plastic molding equipment and manufacture the caps at the plant. The manufacturing engineer estimates the material, labor, and other costs would be 3 cents per cap. (a) If 11 million caps per year are needed and the molding equipment is installed, what is the payback period? (b) The plastic molding equipment would be depreciated by straightline depreciation using a 6-year useful life and no salvage value. Assuming a combined 26% income tax rate, what is the after-tax payback period, and what is the after-tax rate of return?Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $90,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $1,500 per year using the gang punch, but raw material costs would decrease $11,500 per year. MARR is 5%/year. What is the internal rate of return of this investment?Kinky Copies may buy a high-volume copier. The machine costs $60,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $22,000. The machine will save $23,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $5,000. The firm's tax rate is 21%, and the discount rate is 11%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. NPV
- Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $135,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $4,500 per year using the gang punch, but raw material costs would decrease $15,500 per year. MARR is 5%/year. What is the internal rate of return of this investment? % Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.Beryl’s Iced Tea currently rents a bottling machine for $50,000 per year, including all maintenance expenses. It is considering purchasing a machine instead, and is comparing two options: Purchase the machine it is currently renting for $150,000. This machine will require $20,000 per year in ongoing maintenance expenses. Purchase a new, more advanced machine for $250,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $10,000 per year. Also, $35,000 will be spent upfront in training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate is 35%. Should Beryl’s Iced…Kinky Copies may buy a high-volume copier. The machine costs $100,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $28,000. The machine will save $18,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $9,000. The firm's tax rate is 21%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. $ 8,304.15 NPV
- Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $125,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase $1,500 per year using the gang punch, but raw material costs would decrease $10,000 per year. MARR is 5%/year. Part a Your answer is incorrect. What is the internal rate of return of this investment? % Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $48,000 and a remaining useful life of four years. It can be sold now for $58,000. Variable manufacturing costs are $48,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Revenues Machine A: Keep or Replace Analysis Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted…Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $48,000 and a remaining useful life of four years. It can be sold now for $58,000. Variable manufacturing costs are $48,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Req C and D Compute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should be indicated with a minus…