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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 four years. In addition, this new machine would allow the production of one new type of bagel that 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 four-year useful life. Bugle's discount rate is 14%. (Ignore income taxes in this problem.)
- The internal rate of return for this investment is closest to which of the following?
ERG Theory
A theory in psychology that categorizes human needs into three categories: Existence, Relatedness, and Growth.
VIE Theory
Stands for Valence, Instrumentality, and Expectancy, a psychological theory that explains motivation in terms of an individual's belief in the effectiveness and value of effort towards achieving a goal.
Goal Theory
The concept that setting specific, challenging, and attainable goals can significantly enhance employee performance.
Motivate
The process of providing reasons for people to act in a desired manner.
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