Accounting course

Internal Rate of Return Method -Two Projects Cousin's Salted Snack Company is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $61,645.50 and could be used to deliver an additional 54,000 bags of taquitos chips per year. Each bag of chips can be sold for a contribution margin of $0.58. The delivery truck operating expenses, excluding depreciation, are $0.79 per mile for 18,000 miles per year. The bagging machine would replace an old bagging machine, and its net investment cost would be $41,865.00. The new machine would require three fewer hours of direct labor per day. Direct labor is $10 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have seven-year lives. The minimum rate of return is 19%. However, Cousin's has funds to invest in only one of the projects. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 0.943 0.909 0.893 1.736 1.690 0.870 1.626 2.283 2.855 20% 0.833 1.528 2.106 2.589 2.487 2.402 3.037 3.170 3.791 3.605 3.353 2.991 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 4.355 4.111 3.326 3.785 4.160 7 4.868 5.335 5.759 6.145 4.564 4.968 5.328 5.650 3.605 3.837 4.031 4.487 4.772 5.019 9 4.192 a. Compute the internal rate of return for each investment. Use the above table of present value of an annuity of $1. Enter the present value factor to three decimal places. Delivery Truck Bagging Machine Present value factor Internal rate of return %