Compute the net present value for each investment

Assignment Help Business Management

Reference no: EM131017542

Snack Company Ltd is considering two possible investments:

A delivery truck or

A bagging machine

The delivery truck would cost $44,271 and could be used to deliver an additional 61,000 bags of pretzels each year. Each bag of pretzels can be sold for a contribution margin of $0.40. The delivery truck operating costs, excluding depreciation, are $0.70 per mile for 21,000 mile per year. The bagging truck would replace an old bagging machine, and its net investment cost would be $49,920. The new machine would require three fewer hours of direct labour per day. Direct labour is $16 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have seven-year lives. The minimum rate of return is 13%. However Snack Company Ltd has funds to invest in only one of the projects.

Required:

Compute the net present value for each investment.

Provide a memo to the management with a recommendation.

Reference no: EM131017542

Questions Cloud

What should the correct one be : Give a precise answer to whether: the suggested price increase by $1 will raise additional revenues by $120 million from whatever units will be sold, why yes and why not.

What is the total impedance of the circuit : In the circuit shown, if the value of the reactive component was increased, how would it change the waveforms - What is the total impedance of the circuit?

What would be the semi annual interest : A company issues $100,000 of a 6% coupon, $1,000 par value bond. what would be the semi annual interest payment journal entry?

How do those affect how financial information is communicate : Analyze Starbucks' methods for fixed asset and intangible asset acquisitions as well as depreciation and amortization, including asset categorization. How do these methods affect the balance sheet, income statement, and statement of cash flows?

Compute the net present value for each investment : Direct labour is $16 per hour. There are 250 operating days in the year. Both the truck and the bagging machine are estimated to have seven-year lives. The minimum rate of return is 13%. However Snack Company Ltd has funds to invest in only one of..

Why does he refer to this as market driven policy : What role does elasticity of demand play in the author's position? Can you think of other instances where government will levy this type of tax (sales or excise tax) and why do they levy this type of tax?

Write an equation in slope-intercept form : Find the slope of the line that goes through (-0.1, 0.2) and (0.5, 0.8). Write an equation in slope-intercept form, if possible for the line through (0, -1) that is perpendicular to the line y = x.

What are the criticisms of the payback period : What is the payback period on each project? If Caledonia imposes a 3-year maximum acceptable payback period, which of these projects should be accepted?

Describe possible causes for freight movement congestion : Give an example of how regulations impact (positive and negative) the congestion of global movement of freight. Describe 4 environmental issues that impacts strategic intermodal transportation today, from the military and the commercial freight tra..

User Account

All Pages