Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below.] Wendell's Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life. (Ignore income taxes.) Solve this question using your financial calculator or Excel, NOT the tables in the chapter. Requirement 1: What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? (Omit the "$" sign in your response.)

Explanation / Answer

Total annual cash inflows associated with the new machine = 3800+(1000*1.20)= $5000

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