50.00 points Wenders Donut Shoppe is investigating the purchase of a new48,300 d

Question

50.00 points Wenders Donut Shoppe is investigating the purchase of a new48,300 donut-making rn chine. The ne machine would penit the company to reduce the amount of part-time help needed, at a cost savings of $6,800 per year. In addtion, the new machine would allow the company to produce one new style of donut resulting in the sale of 1,700 dozen more donuts each year. The company reaizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a stx-year useful life. Click here to view Exhibit 13B-1 and Exhibit 138-2, to determine the appropniate discount factor(s) using tables Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting Annual savings in part-time help Added contribution margin from expanded sales Annual cash infiows 2 Find the internal rate of return promised by the new machine to the nearest whole percent / Choose DenominatorHFFact umber of years Intemal rate of return Factor

Explanation / Answer

1.

2.

3. Internal rate of return: 13%

Annual savings in part-time help 6800 Added contibution margin from expanded sales (1700 x $2) 3400 Annual cash inflows 10200

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