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The Confectioner's Corner Inc. would like to buy a new machine that automatically dips chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $140,000. The machine would be usable for 10 years but would require the replacement of several key parts at the end of the 5th year. These parts would cost $8,500, including installation. After 10 years, the machine could be sold for $7,250.

The company estimates that the cost to operate the machine will be $8,000 per year. The present method of dipping chocolates costs $32,000 per year. In addition to reducing costs, the new machine will increase production by 6,400 boxes of chocolates per year. The company realizes a contribution margin of $2.40 per box. A 16% rate of return is required on all investments.

Required QUESTION:

1. What are the net annual cash inflows that will be provided by the new dipping machine?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9801107

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