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 $279200. In addition, Austin estimates that the new machine will increase the company’s annual net cash inflows by $43,000.
The machine will have a 12-year useful life and no salvage value. Instructions
1(a) Calculate the cash payback period.
2(b) Calculate the accounting rate of return.
3 c) Calculate the machine’s net present value assuming the cost of capital is 10%.
4(d) Calculate the machine’s internal rate of return.
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