Wendells Donut Shoppe is investigating the purchase of a new $42,900 donut-making machine. The new...
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Wendells Donut Shoppe is investigating the purchase of a new $42,900 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,000 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life.
2. What discount factor should be used to compute the new machines internal rate of return? (Round your answers to 3 decimal places.)
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