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(Solution Download) The Sweetwater Candy Company would like to buy a new machine that would automatically Ac?A?dipAc?


 

 

 

 

 

 

 

 

 

 

 

 

 

The Sweetwater Candy Company would like to buy a new machine

 

that would automatically Ac?A?dipAc??? chocolates. The dipping operation is

 

currently done largely by hand. The machine the company is

 

considering costs $210,000. 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 $10,200, 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 $8,200 per year. The

 

present method of dipping chocolates costs $42,000 per year. In

 

addition to reducing costs, the new machine will increase

 

production by 4,000 boxes of chocolates per year. The company

 

realizes a contribution margin of $1.45 per box. A 10% rate of

 

return is required on all investments.

 

 

 

 

 

 

 

 

 

 

 

 

Compute the new machineAc??cs net present value. (Any cash

 

outflows should be indicated by a minus sign. Round discount

 

factor(s) to 3 decimal places and intermediate calculations to

 

nearest dollar amount.)

 

 

Now 1 2 3 4 5 (years)

 

Purchase of machines

 

Annual net cash inflows

 

 

Replacement parts

 

Salvage value of machine

 

Total cash flows

 

Discount factor (10%)

 

Present Value

 

Net present Value

 

 


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