10 11 Problem Information: Belgi's Chocolates, Inc. is considering buying a new machine that will 12...

 

 

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10 11 Problem Information: Belgi's Chocolates, Inc. is considering buying a new machine that will 12 automatically dip chocolates. (The dipping operation is currently done primarily by hand.) The annual costs 13 of the current method, relevant costs if the new machine is purchased, and other important information are 14 provided on the Given Data worksheet. 16 17 18 19 Reduction in annual operating costs: 20 Annual operating costs using current hand method BELGI'S CHOCOLATES, INC. Net Annual Cash Inflows Provided by the New Dipping Machine 21 Less: Annual operating costs of new machine 22 = Annual savings in operating costs Plus: Increased annual contribution margin due to 23 increased production with the new machine 24 Total net annual cash inflows 25 26 297 30 31 Cost of the new machine 32 Parts replacement costs end of 6th year 33 Net annual cash inflows Item Net Present Value of the New Machine Amount of Year(s) Cash Flows 34 Salvage value of new machine 35 Net present value 36 Using the general decision rule for the net present value method, should the management of the company accept this project? Indicate your answer by typing Yes or 37 No in the cell to the right. Lab 5 Given Data PV of Cash Flows 2 3 4 Cost of new machine 5 Life expectancy of new machine, in years 13 6 Parts replacement costs at the end of year 6 7 Salvage value of new machine at the end of year 10 8 9 Annual operating costs of new machine 0 Annual operating costs of current method 11 Increased production (boxes) per year 12 Contribution margin per box Required return on investment FE Given Data: 15 BELGI'S CHOCOLATES, INC. 20 CT 22 23 24 264 Pmt = This argument is used only for the total net annual cash inflows, which is computed in Part 1. Leave this argument blank for all other PV computations. 26 FV 27 $ LA GA 28 29 30 Type = Leave this field blank. Doing so indicates 31 payments are made at the end of the period. 32 33 34 35 $ $ 16 17 The syntax of the PV function is: PV(rate, nper, pmt, [fv], [type]) 18 Rate - = Interest rate, in this problem, .14 [14%] Nper Number of periods, in years = LA LA $ $ = Future value. In this problem, the future value is the cost of the replacement of parts at the end of year 6 and the salvage value of the machine at the end of year 10. 90,000 10 25,000 8,000 10,000 19,000 5,500 2.00 14% 10 11 Problem Information: Belgi's Chocolates, Inc. is considering buying a new machine that will 12 automatically dip chocolates. (The dipping operation is currently done primarily by hand.) The annual costs 13 of the current method, relevant costs if the new machine is purchased, and other important information are 14 provided on the Given Data worksheet. 16 17 18 19 Reduction in annual operating costs: 20 Annual operating costs using current hand method BELGI'S CHOCOLATES, INC. Net Annual Cash Inflows Provided by the New Dipping Machine 21 Less: Annual operating costs of new machine 22 = Annual savings in operating costs Plus: Increased annual contribution margin due to 23 increased production with the new machine 24 Total net annual cash inflows 25 26 297 30 31 Cost of the new machine 32 Parts replacement costs end of 6th year 33 Net annual cash inflows Item Net Present Value of the New Machine Amount of Year(s) Cash Flows 34 Salvage value of new machine 35 Net present value 36 Using the general decision rule for the net present value method, should the management of the company accept this project? Indicate your answer by typing Yes or 37 No in the cell to the right. Lab 5 Given Data PV of Cash Flows 2 3 4 Cost of new machine 5 Life expectancy of new machine, in years 13 6 Parts replacement costs at the end of year 6 7 Salvage value of new machine at the end of year 10 8 9 Annual operating costs of new machine 0 Annual operating costs of current method 11 Increased production (boxes) per year 12 Contribution margin per box Required return on investment FE Given Data: 15 BELGI'S CHOCOLATES, INC. 20 CT 22 23 24 264 Pmt = This argument is used only for the total net annual cash inflows, which is computed in Part 1. Leave this argument blank for all other PV computations. 26 FV 27 $ LA GA 28 29 30 Type = Leave this field blank. Doing so indicates 31 payments are made at the end of the period. 32 33 34 35 $ $ 16 17 The syntax of the PV function is: PV(rate, nper, pmt, [fv], [type]) 18 Rate - = Interest rate, in this problem, .14 [14%] Nper Number of periods, in years = LA LA $ $ = Future value. In this problem, the future value is the cost of the replacement of parts at the end of year 6 and the salvage value of the machine at the end of year 10. 90,000 10 25,000 8,000 10,000 19,000 5,500 2.00 14%