Pops Popcorn has three project choices for the coming year, but only $9,000 in its budget for new projects. Project 1 is a new corn seed separator that identifies grannies (seeds that do not pop when making popcorn in a microwave) and will separate them from good popcorn seeds prior to packaging. The ability to advertise no grannies in the popping process is worth $3,000 per year in additional net sales and should be good for five years. Project 1 is an average-risk project, so the company has assigned a 10% discount rate to it. Project 2 is a new product: kettle corn. To make microwave kettle corn packages, the company needs a new processing machine. Adding kettle corn to the lineup will increase net sales by $3,500 over the next four years. Project 2 is a high-risk project, so the company has assigned a 15% discount rate to it. Project 3 is a more efficient packaging machine. This new packaging machine requires less maintenance and runs on less electricity than the current machine. The projected annual cost savings is $2,000 over the next eight years. Project 3 is a low-risk project, so the company has assigned an 8.5% discount rate to it. Each of the three machines costs $9,000 and will exhaust all the capital budgeting dollars for the year. Which machine do you buy? why ?

Answer rating: 100% (QA)

Based on the information provided Pops Popcorn should invest in Project 3 The More Efficient Packagi... View the full answer