Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. yummy candy company is considering purchasing a se

Yummy Candy Company is considering purchasing a second chocolate dipping machine in order to expand...

50.1K

Verified Solution

Question

Accounting

Yummy Candy Company is considering purchasing a second chocolate dipping machine in order to expand their business. The information Yummy has accumulated regarding the new machine is:

Cost of the machine $120,000
Life of the machine 5 years
Required rate of return 6%
Increased annual contribution margin
Year 1 20,000
Year 2 30,000
Year 3 40.000
Year 4 45,000
Year 5 50,000

Yummy estimates they will be able to produce more candy using the second machine and thus increase their annual contribution margin. They also estimate there will be a small disposal value of the machine but the cost of removal will offset that value. Ignore income tax issues in your answers. Assume all cash flows occur at year-end except for initial investment amounts.

Required:

Calculate the following for the new machine:

  1. Net present value
  2. Payback period
  3. Discounted payback period
  4. Internal rate of return (using the interpolation method)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

The lymphatic system includes our bodies' defenses against infections. AIDS, Leukemia, many autoimmune disorders, and allergies are...

Medical Sciences
Q

Assume the Canadian economy is at the equilibrium with output ?? and price ?? and then...

Economics
Q

Genetics - Worksheet #9 Sex-linkage Problems Name ____________________________________ Date __________ Class_____ Make sure that you show the crosses for...

Biology
Q

A rock is 4.2% by mass fayalite (Fe2SiO4), 8.4% by mass forsterite (Mg2SiO4), and the remainder...

Chemistry
Q

Chemical analysis of an unknown compound gives a molar mass of 334 g/mol and a percentage composition...

Chemistry
Q

Question #1. The comparative balance sheets of Sloan Company reveal that the accounts receivable (before deducting allowances)...

Accounting
Q

Graph the solution of the system of linear inequalities.5x-2y ? 10y ? -3Use the graphing...

Basic Math
Q

The following information pertains to the inventory of Parvin Company: During the year, Parvin sold...

Accounting
Q

On 1 May 2019, a standard-rate supply is made at price of OMR 2,000 exclusive...

Accounting
Q

In the following chart you will find the expenses when Sheldon Shirts produces and sells...

Accounting
Q

Zeus Ltd was established on 1 July 2018 with share capital totalling $132,000. ...

Accounting
Q

Goldworld Mining Inc. (GMI) is a new, privately owned gold mining company that will prepare...

Accounting