(Ignore income taxes in this problem.) Bugle\'s Bagel Bakery is investigating th

Question

(Ignore income taxes in this problem.) Bugle's Bagel Bakery is investigating the purchase of a new bagel making machine. This machine would provide an annual operating cost savings of $3,650 for each of the next 4 years. In addition, this new machine would allow the production of one new type of bagel which would result in selling 1,500 dozen more bagels each year. The company earns a contribution margin of $0.90 on each dozen bagels sold. The purchase price of this machine is $13,450 and it will have a 4 year useful life. Bugle's discount rate is 14%. The total annual cash inflow from this machine for capital budgeting purposes is: A) $3,650 B) $5,150 C) $4,750 D) $5,000

Explanation / Answer

Hi, If you like my answer, please rate my answer first and according to my answer...that way only I can earn points. Thanks Initial Cost = -13450 Total cash flow each year = 3650 + 1500*0.9=5000 N= 4 FV = 0 I = 14% NPV = 3715.40 So answer is option A) 3650

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