Baker's Pride Corporation is considering purchasing one of two new pizza convection ovens. Either oven would...
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Baker's Pride Corporation is considering purchasing one of two new pizza convection ovens. Either oven would make it possible for the company to expand into gourmet frozen pizza ro be sold in supermarkets. Estimates regarding each oven are provided below. Original Cost Estimated Useful Life Annual Cash Flows Annual cash outflow Baker Delight $110,000 8 years $36,000 $11,000 Superior Baker $160,000 8 years $49,000 $14,000 Instructions Calculate the net present value and profitability index of each oven. Based on your calculations, which oven should be purchased? Assume a 9% discount rate. Note: factor for the present value of an ordinary annuity 8 years @9% = 5.53482 Baker's Pride Corporation is considering purchasing one of two new pizza convection ovens. Either oven would make it possible for the company to expand into gourmet frozen pizza ro be sold in supermarkets. Estimates regarding each oven are provided below. Original Cost Estimated Useful Life Annual Cash Flows Annual cash outflow Baker Delight $110,000 8 years $36,000 $11,000 Superior Baker $160,000 8 years $49,000 $14,000 Instructions Calculate the net present value and profitability index of each oven. Based on your calculations, which oven should be purchased? Assume a 9% discount rate. Note: factor for the present value of an ordinary annuity 8 years @9% = 5.53482
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Managerial Accounting Tools for business decision making
ISBN: 978-0470477144
5th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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