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Category > Business & Finance Posted 10 Jun 2017 My Price 11.00

Mansion is a famous restaurant in the French Quarter of New Orleans.

Mansion is a famous restaurant in the French Quarter of New Orleans.

Bouillabaisse Sophie is Mansion’s house specialty. Management is considering the purchase of a machine that would prepare all the ingredients, mix them automatically, and cook the dish to the restaurant’s specifications.

The machine will function for an estimated 12 years, and the purchase price, including installation, is $250,000. Estimated residual value is $25,000. This labor-saving device is expected to increase cash flows by an average of $42,000 per year during its estimated useful life. For capital investment decisions, the restaurant uses a 12 percent minimum rate of return. Use Tables 3 and 4 in the appendix on future value and present value tables.

Required

1. Using the net present value method, determine if the company should purchase the machine. Support your answer.

2. Manager Insight: If management had decided on a minimum rate of return of 14 percent, should the machine be purchased? Show all computations to support your answer

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Status NEW Posted 10 Jun 2017 09:06 AM My Price 11.00

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