Wendell’s Donut Shoppe is investigating the purchase of a new $31,300 donut-making macne. The new macne would permit the company to

Excerpt
conditions, what is the internal rate of return? (nt: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to nearest whole percentage.)

Wendell’s Donut Shoppe is investigating the purchase of a new $31,300 donut-making macne. The new macne would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,300 per year. In addition, the new macne would allow the company to produce one new style of donut, resulting in the sale of 1,300 dozen more donuts each year. The company realizes a contribution margin of $3.00 per dozen donuts sold. The new macne would have a six-year useful life. Click here to view Exbit 7B-1 and Exbit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What would be the total annual cash inflows associated with the new macne for capital budgeting purposes? 2. What discount factor should be used to compute the new macne’s internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new macne’s internal rate of return? (Round your final answer to nearest whole percentage.) 4. In addition to the data given previously, assume that the macne will have a $12,820 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (nt: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to nearest whole percentage.)

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