Wendell’s Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,000 dozen more donuts each year. The company realizes a contribution margin of $1.20 per dozen donuts sold. The new machine would have a six-year useful life.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes?
2. What discount factor should be used to compute the new machine’s internal rate of return? (Round your answers to 3 decimal places.)
3. What is the new machine’s internal rate of return to the nearest whole percent?
4. In addition to the data given previously, assume that the machine will have a $9,125 salvage value at the end of six
years. Under these conditions, what is the internal rate of return to the nearest whole percent?

Note: The query is not complete and does not contain the necessary information for part 4. It is impossible to fully answer this question without the exhibits stated in the questions. Up until part 3, we will be solving it.

1) The entire annual cash inflows must be calculated for this, and the formula is given below:

Total annual cash inflows are equal to the annual savings from part-time labor plus the additional contribution margin from anticipated sales.

Annual Cash Inflows Total = 3800 + ( 1000 x 1.20)

= 3800 + 1200

= 5000

2. Formula for figuring up the discount percentage:

Discount Factor = New Machine Price/Annual Cash Flow

New machine cost is 18600 USD.

Annual inflow of cash = 5000

Discount Factor is equal to 18600/5000.

Discount Ratio is 3.72.

3. The examples, which are absent from this question, show that the discount factor for six years is roughly closest to 16%, hence the internal rate of return for the new machine is equal to 16%.

Note, without the exhibits indicated in the questions, the question is insufficient and cannot be utilized in Part 4. It cannot be solved any further.

To learn more about appropriate discount factor: https://brainly.com/question/18956029

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