The Sweetwater Candy Company would like to buy a new machine for $160,000 that automatically “dips” chocolates. Themanufacturer estimates the machine would be usable for five years but would require replacement of several key parts costing$10,800 at the end of the third year. After five years, the machine could be sold for $5,000.The company estimates the cost to operate the machine will be $8,800 per year. The present labor-intensive method of dippingchocolates costs $48,000 per year. In addition to reducing costs, the new machine will increase production by 4,000 boxes ofchocolates per year. The company realizes a contribution margin of $1.40 per box. A 18% rate of return is required on all investments.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.Required:1. What are the annual net cash inflows 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 1Required 2What are the annual net cash inflows provided by the new dipping machine?Total annual net cash inflows Required 1 Required 2Compute the new machine's net present value.Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.Net present value

Answer-1Annual saving in operating costs $39,200Increased annual contribution margin…

Answered: The Sweetwater Candy Company would like…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $240,000. 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 $11,600, including installation. After five years, the machine could be sold for $5,000. The company estimates that the cost to operate the machine will be $9,600 per year. The present method of dipping chocolates costs $56,000 per year. In addition to reducing costs, the new machine will increase production by 3,000 boxes of chocolates per year. The company realizes a contribution margin of $1.80 per box. A 13% rate of return is required on all investments. Use Excel or spreadsheet to solve. Round answers to the nearest dollar. Required: 1. What are the annual net cash inflows that will be…
The Sweetwater Candy Company would like to buy a new machine for $220,000 that automatically "dips" chocolates. The manufacturer estimates the machine would be usable for five years but would require replacement of several key parts costing $10,300 at the end of the third year. After five years, the machine could be sold for $6,000. The company estimates the cost to operate the machine will be $8,300 per year. The present labor-intensive method of dipping chocolates costs $43,000 per year. In addition to reducing costs, the new machine will increase production by 5,000 boxes of chocolates per year. The company realizes a contribution margin of $1.50 per box. A 15% rate of return is required on all investments. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the annual net cash inflows provided by the new dipping machine? 2. Compute the new machine's net present value.
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. 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…
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 $180,000. 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 $11,000, including installation. After five years, the machine could be sold for $7,000. The company estimates that the cost to operate the machine will be $9,000 per year. The present method of dipping chocolates costs $50,000 per year. In addition to reducing costs, the new machine will increase production by 6,000 boxes of chocolates per year. The company realizes a contribution margin of $1.50 per box. A 18% rate of return is required on all investments. view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What are the annual…
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