Question

Problem 12-22 Net Present Value Analysis [LO12-2] The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation currently is done largely by hand. The machine the company is considering costs $190,000. The manufacturer estimates that the machine would be usable for five years but would require the replacement of several key parts at the end of the third year. These parts would cost $11,100, including installation. After five years, the machine could be sold for $8,000. The company estimates that the cost to operate the machine will be $9,100 per year. The present method of dipping chocolates costs $51,000 per year. In addition to reducing costs, the new machine will increase production by 7.000 boxes of chocolates per year. The company realizes a contribution margin of $1.55 per box. A 21% rate of return is required on all Investments Click here to view Exhibit128:1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the annual net cash inflows that will be provided by the new dipping machine? 2. Compute the new machine's net present value. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What are the annual net cash inflows that will be provided by the new dipping machine? Total annual net cash inflows

Answer 1

Answer c calaulation of annual net ash inflows:- Reduchion n anhual openathg costs $S1000 opeatng Costs, present hand me It,od $9100 operating costS, neo machne costs Anuual sanmgs n opeaating Increaye annual Contibutibn mangi C4000 $ls5) 0,&ro To tal annual met cash tnflows clculation of NPU. Ycav Now Purchase of machne S2AD 52sD Annual het cashinfloos Astks$ Peplacarment parts Sluage value of machune కంo 446502ASD * 199000j 60,0 Tatkut ash floes 0-6830 O.S6y5 O4665o.3ES o-8264 -000 DiScount factor 24608 23५।१ 23,511 Present value(s.19900)$43593 36028 Nel-present lelue 38,841)