Problemcorn doggy inc produces and sells corn dogs the corn, Ask an Expert

Accounting

Problem:

Corn Doggy Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $262,000. In addition, Austin estimates that the new machine will increase the company's annual net cash inflows by $40,300. The machine will have a 12-year useful life and no salvage value.

Requirement:

Question 1: Calculate the payback period.

Question 2: Calculate the machine's internal rate of return.

Question 3: Calculate the machine's net present value using a discount rate of 10%.

Question 4: Assuming Corn Doggy Inc.'s cost of capital is 10%, is the investment acceptable? Why or why not?

Note: Show all workings.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167082

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