Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine...

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Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,500 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 128-1 and Exhibit 128 2. to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $13,755 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest whole percentage.) 1. Annual cash inflows 2 Discount factor 3. Internal rate of return 4, Internal rate of return % % XHIBIT 128-1 "resent Value of $1, Periods 4% 5% 6% 1 0.962 0.952 0943 2 3 0.925 0907 0.890 0.889 0.864 0.840 4 0.855 0.823 0.822 0.784 0,790 0746 0222 0210 0.760 0711 0731 0.677 0703 0.645 10 0676 0614 11 12 13 14 15 16 17 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 18% 19% 20% 21% 22% 24% 25% 0.935 0926 0917 0909 0901 0.893 0885 0 877 0870 0.862 0.855 0 847 0.840 0833 0.826 0 820 0.813 0.806 0.800 0.873 0857 0 842 0826 0812 0.797 0.783 0.769 0.756 0743 0.731 0.7180.706 0.694 0683 0.672 0.661 0.650 0.640 0816 0.794 0.772 0.751 0.731 0.712 0693 0675 0658 0641 0624 0 609 0.593 0.579 0.564 0551 0537 0.524 0.512 0.792 0.763 0.735 0.708 0.683 0659 0616 0.613 0.592 0572 0.552 0534 0516 0.499 0482 0467 0451 0437 0423 0.410 0.747 0.713 0681 0650 0621 0.593 0.567 0543 0.519 0497 0476 0456 0437 0419 0402 0.386 0370 0.355 0.341 0328 0.705 0.666 0.630 0 480 0456 0.432 0 410 0390 0.370 0352 0335 0319 0303 0289 0.275 0.262 0665 0.623 0583 0547 0513 0482 0.452 0425 0.400 0376 0354 0333 0314 0.296 0279 0263 0249 0235 0627 0582 0.540 0502 0.467 0434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0249 0233 0218 0204 0 191 0179 0168 0.592 0544 0500 0 460 0424 0391 0.361 0333 03080284 0.263 0243 0225 0209 0.194 0 180 01670 155 0.144 0.134 0.558 0 508 0463 0422 0356 0352 0322 0295 0270 0247 0227 0208 0191 0176 01620149 0137 0126 0116 0.107 0650 0583 0.327 0475 0429 0388 0350 0317 0 287 0261 0237 0215 0195 0178 0.162 014 0135 0.123 0.112 0.103 0094 0086 0.625 0557 0.497 0444 0397 0156 0319 0286 0.257 0231 0208 0187 0168 0.152 0.137 0.124 0.112 0.102 0092 0083 00/6 0.069 0601 0530 0469 0415 0.368 0326 0.290 0258 0229 0204 0182 0163 0145 0130 0.116 0 104 0093 0084 0075 0.068 0.061 0055 0577 0505 0442 0.388 0.340 0299 0.263 0232 0205 0181 0160 0.141 0.125 0111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0644 0555 0481 0417 0.362 0.315 0275 0219 0209 0183 0160 0140 0.123 0108 0095 0.084 0.074 0065 0057 0.051 0045 0040 0.035 0534 0.458 0394 0339 0.292 0252 0218 0.188 0.163 0141 01230107 0093 0.081 0071 0062 0054 0047 0042 0036 0032 0.028 0513 0436 0371 0317 020 0231 0.195 0170 0 146 0.125 0108 009 0.00 0.069 00600052 0.045 0.019 0014 000 0026 0.023 0 494 0416 0350 0296 0.250 02120 180 0153 0.130 0.111 0.095 0051 0.069 0.059 0051 0044 0038 0012 0.02 0024 0.021 0018 0475 0.396 0.331 0.277 0.232 0.194 0164 0138 0.116 0098 0083 0070 0.060 0.051 0043 0037 0031 0027 0023 0020 0.017 0.014 0.456 0377 0312 0258 0.215 0.178 0149 0124 0 104 0.087 0.073 0.061 0.051 0.013 0.037 0.031 0.026 0022 0019 0016 0.014 0.012 0439 0.359 0.294 0242 0.199 0.164 0.135 0112 0.093 0077 0064 0.053 0044 0.037 0.031 0026 0022 0018 0015 0013 0011 0.009 0.422 0.342 0278 0226 0.184 0.150 0 123 0 101 0083 0068 0.056 0.046 0038 0.032 0.026 0.022 0.018 0.015 0.013 0011 0009 0.007 0.049 0326 0262 0211 0170 0138 0.112 0091 0.406 0074 0.060 0.040 0033 0027 0022 0.018 0015 0012 0010 0.009 0.007 0.006 0.035 0.390 0.310 0247 0197 0.158 0126 0.102 0082 0066 0053 0043 0028 0023 0019 0.015 0013 0010 0.008 0.007 0.006 0:005 0.375 0.295 0.233 0.184 0.146 0.116 0092 0074 0059 0047 0038 0 030 0024 0020 0016 0013 0010 0009 0.007 0.006 0.005 0.004 0.361 0281 0.220 0172 0.135 0.106 0084 0066 0.053 00420033 0.0261.0021001700140011 00091000700060005000410003 18 19 20 21 22 23 24 25 26 S 6 7 S 1 (1+r)* 6 LOS O SES O 1950 965 0 | EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears; 1/(1-(1/(1+x)n)) 2 3 4 6733 6.463 6210 7435 7.108 6 802 8111 7.722 7360 8.760 8.306 7.887 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0952 0943 0935 0.926 0917 0.909 0.901 0.893 0 885 0.877 0.870 0 862 0855 0847 0840 0.833 0826 0820 0813 0806 0.800 1886 1859 1833 1808 1.783 1.759 1736 1713 1.690 1668 1.647 1.626 1.605 1.585 1.366 1547 1528 1509 1.492 1474 1457 1.440 2.775 2.723 2673 2.624 2 577 2531 2487 2444 2.402 2361 2322 2283 2246 2210 2174 2140 2.106 2074 2012 2011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3240 3.170 3.102 3037 2974 2.914 2855 2.798 2.743 2.690 2.639 2 589 2.540 2494 2.448 2.404 2 362 4452 4.329 4212 4.100 3.993 3.890 3.791 3.696 3.605 3517 3433 3352 3274 3199 3.127 3.058 2991 2926 2864 2.803 2.745 2.689 5.242 5.076 4917 4.767 4.623 4.486 4.355 4231 4111 3.998 3.889 3.784 3.685 3589 3.498 3410 3326 3245 3.167 3.092 3020 2951 6,002 5.786 5582 5389 5.206 5.033 4.868 4712 4564 4423 4288 4160 4039 3922 3.812 3.706 3.605 3.508 3416 3.327 3242 3.161 5.971 5.747 5535 5335 5146 4968 4.799 4.639 4487 4344 4.207 4078 3.954 3837 3726 3.619 3.518 34213 329 6515 6 247 5995 5.759 5537 5328 5132 4946 4772 4607 4451 4.303 4.163 4031 3905 3786 3.673 3566 3.463 7.024 6710 6418 6145 5 889 5650 5.426 5216 5019 4833 4659 4.494 4339 4192 4.054 3.923 3.799 3.682 3.571 7:499 7.139 6.805 6.495 6207 5938 5.687 5453 5.234 5029 4836 4656 4486 4327 4177 4035 3902 3.776 3.656 9.385 8863 8.384 7943 7.536 7.161 6814 6492 6194 5918 5.660 5.421 5.197 4988 479) 4611 4439 4278 4127 3.985 3551 3.725 9.986 9394 8853 8358 7.901 7487 7.101 6.750 6424 6 122 5842 5583 5342 5.1184.910 4715 4.533 4.3624.203 4.053 3.912 3.780 10.563 9899 9.295 745 8.244 7786 7367 6982 6.628 6102 6002 5724 5468 5229 5008 4802 4611 4432 4265 4.108 1962 1824 9712 9108 559 8061 7606 7.191 611 6462 6.142 5.847 5575 5324 5.092 4.816 4675 4.489 4.315 4.153 4001 3.859 10.106 9447 8851 8313 292247379 6974 6.604 6265 5954 5668 3.405 5163 4938 4730 4536 4357 4159 4033 3887 9.122 544 8.022 75497120 6729 6.373 6047 5.749 5475 5.222 4.990 4775 4576 4391 4219 4059 3910 9372 756 8201 7.702 7.250 6 840 6.467 6 128 5818 5534 5.273 5033 4.812 4608 4.419 4243 4080 3.928 9604 8950 8365 7839 7.366 6938 6550 6 1985877 5584 5.316 5.070 4.843 4.635 4442 4263 4097 3.942 11 470 10 594 9.8189 129 8514 7963 7.469 7025 6633 6.259 5.929 5628 5.353 5101 4870 4657 4460 4279 4110 3954 14.029 12.821 11.764 10 836 10 017 9.292 8.649 8075 7562 7102 6687 6312 5973 5.665 5.384 5.127 4591 4.675 4476 42924121 3.963 14.451 13.163 12.042 11.061 10 201 9 442 8.772 8176 7645 7170 6.743 6.359 6011 5.696 5410 5.149 4909 4.690 4488 4302 41303970 14.857 13.489 12.303 11.272 10.371 9.580 8883 8266 7.718 7230 6.792 6.399 6044 5723 5432 5.167 4.925 4.703 4.499 4311 4137 3.976 15 247 13.799 12 550 11 469 10 529 9.707 8.985 8348 7.784 7.283 6.835 6434 6073 5.746 5451 5.182 4937 4.713 4507 4318 4143 3.981 15.622 14.094 12 783 11 654 10.675 9 823 9.077 8 422 7.843 7330 6873 6.464 6.097 5.766 5467 5.195 4.948 4721 4514 4323 4147 3985 15.983 14.375 13.003 11 826 10 810 9.929 9.161 8.488 7.896 7.372 6.906 6:491 16.330 14643 13 211 11.987 10.935 10.027 9237 8.548 7943 7409 6.935 6514 6136 5.798 5.492 5215 4964 4734 4.524 4332 4154 3990 16.663 14.398 13 406 12 137 11 051 10 116 9307 8.602 7984 7441 6961 6534 6152 5810 5502 5223 4970 4739 4.528 4.335 4.157 3.992 Taronalan Tanelesam TaaronARTACAR 11 118 10 380 11 652 10 838 12 166 11.274 10.477 9763 10 828 10 059 12.659 11 690 13.134 12.085 11 158 10 316 13.590 12 462 6.118 5.783 5480 5.206 4956 4728 4520 4.328 4.151 3.988 CAME CAFF KAYZARKANERS BARLINAO POSSSUI come 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - ******* Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,500 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts each year. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 128-1 and Exhibit 128 2. to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $13,755 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest whole percentage.) 1. Annual cash inflows 2 Discount factor 3. Internal rate of return 4, Internal rate of return % % XHIBIT 128-1 "resent Value of $1, Periods 4% 5% 6% 1 0.962 0.952 0943 2 3 0.925 0907 0.890 0.889 0.864 0.840 4 0.855 0.823 0.822 0.784 0,790 0746 0222 0210 0.760 0711 0731 0.677 0703 0.645 10 0676 0614 11 12 13 14 15 16 17 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 18% 19% 20% 21% 22% 24% 25% 0.935 0926 0917 0909 0901 0.893 0885 0 877 0870 0.862 0.855 0 847 0.840 0833 0.826 0 820 0.813 0.806 0.800 0.873 0857 0 842 0826 0812 0.797 0.783 0.769 0.756 0743 0.731 0.7180.706 0.694 0683 0.672 0.661 0.650 0.640 0816 0.794 0.772 0.751 0.731 0.712 0693 0675 0658 0641 0624 0 609 0.593 0.579 0.564 0551 0537 0.524 0.512 0.792 0.763 0.735 0.708 0.683 0659 0616 0.613 0.592 0572 0.552 0534 0516 0.499 0482 0467 0451 0437 0423 0.410 0.747 0.713 0681 0650 0621 0.593 0.567 0543 0.519 0497 0476 0456 0437 0419 0402 0.386 0370 0.355 0.341 0328 0.705 0.666 0.630 0 480 0456 0.432 0 410 0390 0.370 0352 0335 0319 0303 0289 0.275 0.262 0665 0.623 0583 0547 0513 0482 0.452 0425 0.400 0376 0354 0333 0314 0.296 0279 0263 0249 0235 0627 0582 0.540 0502 0.467 0434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0249 0233 0218 0204 0 191 0179 0168 0.592 0544 0500 0 460 0424 0391 0.361 0333 03080284 0.263 0243 0225 0209 0.194 0 180 01670 155 0.144 0.134 0.558 0 508 0463 0422 0356 0352 0322 0295 0270 0247 0227 0208 0191 0176 01620149 0137 0126 0116 0.107 0650 0583 0.327 0475 0429 0388 0350 0317 0 287 0261 0237 0215 0195 0178 0.162 014 0135 0.123 0.112 0.103 0094 0086 0.625 0557 0.497 0444 0397 0156 0319 0286 0.257 0231 0208 0187 0168 0.152 0.137 0.124 0.112 0.102 0092 0083 00/6 0.069 0601 0530 0469 0415 0.368 0326 0.290 0258 0229 0204 0182 0163 0145 0130 0.116 0 104 0093 0084 0075 0.068 0.061 0055 0577 0505 0442 0.388 0.340 0299 0.263 0232 0205 0181 0160 0.141 0.125 0111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0644 0555 0481 0417 0.362 0.315 0275 0219 0209 0183 0160 0140 0.123 0108 0095 0.084 0.074 0065 0057 0.051 0045 0040 0.035 0534 0.458 0394 0339 0.292 0252 0218 0.188 0.163 0141 01230107 0093 0.081 0071 0062 0054 0047 0042 0036 0032 0.028 0513 0436 0371 0317 020 0231 0.195 0170 0 146 0.125 0108 009 0.00 0.069 00600052 0.045 0.019 0014 000 0026 0.023 0 494 0416 0350 0296 0.250 02120 180 0153 0.130 0.111 0.095 0051 0.069 0.059 0051 0044 0038 0012 0.02 0024 0.021 0018 0475 0.396 0.331 0.277 0.232 0.194 0164 0138 0.116 0098 0083 0070 0.060 0.051 0043 0037 0031 0027 0023 0020 0.017 0.014 0.456 0377 0312 0258 0.215 0.178 0149 0124 0 104 0.087 0.073 0.061 0.051 0.013 0.037 0.031 0.026 0022 0019 0016 0.014 0.012 0439 0.359 0.294 0242 0.199 0.164 0.135 0112 0.093 0077 0064 0.053 0044 0.037 0.031 0026 0022 0018 0015 0013 0011 0.009 0.422 0.342 0278 0226 0.184 0.150 0 123 0 101 0083 0068 0.056 0.046 0038 0.032 0.026 0.022 0.018 0.015 0.013 0011 0009 0.007 0.049 0326 0262 0211 0170 0138 0.112 0091 0.406 0074 0.060 0.040 0033 0027 0022 0.018 0015 0012 0010 0.009 0.007 0.006 0.035 0.390 0.310 0247 0197 0.158 0126 0.102 0082 0066 0053 0043 0028 0023 0019 0.015 0013 0010 0.008 0.007 0.006 0:005 0.375 0.295 0.233 0.184 0.146 0.116 0092 0074 0059 0047 0038 0 030 0024 0020 0016 0013 0010 0009 0.007 0.006 0.005 0.004 0.361 0281 0.220 0172 0.135 0.106 0084 0066 0.053 00420033 0.0261.0021001700140011 00091000700060005000410003 18 19 20 21 22 23 24 25 26 S 6 7 S 1 (1+r)* 6 LOS O SES O 1950 965 0 | EXHIBIT 128-2 Present Value of an Annuity of $1 in Arrears; 1/(1-(1/(1+x)n)) 2 3 4 6733 6.463 6210 7435 7.108 6 802 8111 7.722 7360 8.760 8.306 7.887 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0952 0943 0935 0.926 0917 0.909 0.901 0.893 0 885 0.877 0.870 0 862 0855 0847 0840 0.833 0826 0820 0813 0806 0.800 1886 1859 1833 1808 1.783 1.759 1736 1713 1.690 1668 1.647 1.626 1.605 1.585 1.366 1547 1528 1509 1.492 1474 1457 1.440 2.775 2.723 2673 2.624 2 577 2531 2487 2444 2.402 2361 2322 2283 2246 2210 2174 2140 2.106 2074 2012 2011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3240 3.170 3.102 3037 2974 2.914 2855 2.798 2.743 2.690 2.639 2 589 2.540 2494 2.448 2.404 2 362 4452 4.329 4212 4.100 3.993 3.890 3.791 3.696 3.605 3517 3433 3352 3274 3199 3.127 3.058 2991 2926 2864 2.803 2.745 2.689 5.242 5.076 4917 4.767 4.623 4.486 4.355 4231 4111 3.998 3.889 3.784 3.685 3589 3.498 3410 3326 3245 3.167 3.092 3020 2951 6,002 5.786 5582 5389 5.206 5.033 4.868 4712 4564 4423 4288 4160 4039 3922 3.812 3.706 3.605 3.508 3416 3.327 3242 3.161 5.971 5.747 5535 5335 5146 4968 4.799 4.639 4487 4344 4.207 4078 3.954 3837 3726 3.619 3.518 34213 329 6515 6 247 5995 5.759 5537 5328 5132 4946 4772 4607 4451 4.303 4.163 4031 3905 3786 3.673 3566 3.463 7.024 6710 6418 6145 5 889 5650 5.426 5216 5019 4833 4659 4.494 4339 4192 4.054 3.923 3.799 3.682 3.571 7:499 7.139 6.805 6.495 6207 5938 5.687 5453 5.234 5029 4836 4656 4486 4327 4177 4035 3902 3.776 3.656 9.385 8863 8.384 7943 7.536 7.161 6814 6492 6194 5918 5.660 5.421 5.197 4988 479) 4611 4439 4278 4127 3.985 3551 3.725 9.986 9394 8853 8358 7.901 7487 7.101 6.750 6424 6 122 5842 5583 5342 5.1184.910 4715 4.533 4.3624.203 4.053 3.912 3.780 10.563 9899 9.295 745 8.244 7786 7367 6982 6.628 6102 6002 5724 5468 5229 5008 4802 4611 4432 4265 4.108 1962 1824 9712 9108 559 8061 7606 7.191 611 6462 6.142 5.847 5575 5324 5.092 4.816 4675 4.489 4.315 4.153 4001 3.859 10.106 9447 8851 8313 292247379 6974 6.604 6265 5954 5668 3.405 5163 4938 4730 4536 4357 4159 4033 3887 9.122 544 8.022 75497120 6729 6.373 6047 5.749 5475 5.222 4.990 4775 4576 4391 4219 4059 3910 9372 756 8201 7.702 7.250 6 840 6.467 6 128 5818 5534 5.273 5033 4.812 4608 4.419 4243 4080 3.928 9604 8950 8365 7839 7.366 6938 6550 6 1985877 5584 5.316 5.070 4.843 4.635 4442 4263 4097 3.942 11 470 10 594 9.8189 129 8514 7963 7.469 7025 6633 6.259 5.929 5628 5.353 5101 4870 4657 4460 4279 4110 3954 14.029 12.821 11.764 10 836 10 017 9.292 8.649 8075 7562 7102 6687 6312 5973 5.665 5.384 5.127 4591 4.675 4476 42924121 3.963 14.451 13.163 12.042 11.061 10 201 9 442 8.772 8176 7645 7170 6.743 6.359 6011 5.696 5410 5.149 4909 4.690 4488 4302 41303970 14.857 13.489 12.303 11.272 10.371 9.580 8883 8266 7.718 7230 6.792 6.399 6044 5723 5432 5.167 4.925 4.703 4.499 4311 4137 3.976 15 247 13.799 12 550 11 469 10 529 9.707 8.985 8348 7.784 7.283 6.835 6434 6073 5.746 5451 5.182 4937 4.713 4507 4318 4143 3.981 15.622 14.094 12 783 11 654 10.675 9 823 9.077 8 422 7.843 7330 6873 6.464 6.097 5.766 5467 5.195 4.948 4721 4514 4323 4147 3985 15.983 14.375 13.003 11 826 10 810 9.929 9.161 8.488 7.896 7.372 6.906 6:491 16.330 14643 13 211 11.987 10.935 10.027 9237 8.548 7943 7409 6.935 6514 6136 5.798 5.492 5215 4964 4734 4.524 4332 4154 3990 16.663 14.398 13 406 12 137 11 051 10 116 9307 8.602 7984 7441 6961 6534 6152 5810 5502 5223 4970 4739 4.528 4.335 4.157 3.992 Taronalan Tanelesam TaaronARTACAR 11 118 10 380 11 652 10 838 12 166 11.274 10.477 9763 10 828 10 059 12.659 11 690 13.134 12.085 11 158 10 316 13.590 12 462 6.118 5.783 5480 5.206 4956 4728 4520 4.328 4.151 3.988 CAME CAFF KAYZARKANERS BARLINAO POSSSUI come 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - *******

Answer rating: 100% (QA)

To calculate the total annual cash inflows associated with the new machine for capital budgeting purposes we need to consider the cost savings from re... View the full answer