Problem 1: Due to increased demand, the management of Bubble Tea Beverage Company is considering to...

 

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Problem 1: Due to increased demand, the management of Bubble Tea Beverage Company is considering to purchase new equipment to increase the production and sales revenues. The useful life of the equipment is 5 years and the company's maximum desired payback period is 2 years. The inflow and outflow of cash associated with the new equipment is given below: $110,000 $100,000 $20,000 $30,000 $1,000 The initial cost of equipment Annual cash inflow: Sales (all cash) Annual cash outflow: Cost of ingredients Salaries expenses Maintenance expenses Required: Draw a timeline of cash flows for this scenario. Compute payback period for this equipment purchase. Should Bubble Tea Beverage Company purchase the new equipment? Why or why not? Problem 1: Due to increased demand, the management of Bubble Tea Beverage Company is considering to purchase new equipment to increase the production and sales revenues. The useful life of the equipment is 5 years and the company's maximum desired payback period is 2 years. The inflow and outflow of cash associated with the new equipment is given below: $110,000 $100,000 $20,000 $30,000 $1,000 The initial cost of equipment Annual cash inflow: Sales (all cash) Annual cash outflow: Cost of ingredients Salaries expenses Maintenance expenses Required: Draw a timeline of cash flows for this scenario. Compute payback period for this equipment purchase. Should Bubble Tea Beverage Company purchase the new equipment? Why or why not?

Answer rating: 100% (QA)

Bubble Tea Beverage Company Equipment Purchase Analysis Timeline of Cash Flows Year Cash Inflow Cash ... View the full answer