Able Co. is considering the purchase of a new donut maker. The new machine will cost $4,500
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Question:
Able Co. is considering the purchase of a new donut maker. The new machine will cost $4,500 annually to operate which includes $1,500 of depreciation and will replace an old machine that cost $6,000 to operate which includes $1,000 of depreciation. The new machine will also increase production by 10,000 doughnuts a year, which will provide a contribution margin of $.02 per doughnut. The old machine can be sold for $5,000 and the new machine will cost $25,000
Required:
Compute the incremental annual net cash inflows provided by the new machine.
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham
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