America Cola is considering the purchase of a special-purpose bottling machine for $ 28,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs:

Year 1 $12,000

Year 2 $10,000

Year 3 $9,000

Year 4 $8,000

Total $39,000

America Cola uses a required rate of return of 20% in its capital budgeting decisions. Ignore income taxes in your analyisis. Assume all cash flows occur at year-end except for initial investment amounts.

*Future Value of $1 factors

* Present Value of $1 factors

*Future value of annuity of $1 factors

*Present Value of annuity of $1 factors

Requirements

Calculate the following for the special purpose bottling machine:

1. Net present value

2. Payback period

3. Discounted payback period

4. Internal rate of return (using the interpolation method)

5. Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.)

Compound Amount of $1.00 (The Future Value of $1.00 S = A1 + rr. In this table P $1.00 Periods 2% 4% 6% 8% 10% 12% 14% 16% 10% 20% 22s 2n % 40% Periods 1020 1.040 1.060 1080 1100 1.120 140 11601.1801.200 1.220 1.2402601.2801.3001.320 2 1.040 1082 1.1241.166 1.210 1.254.300 1346 1392 1440 1.488 15381.5881.63816901.742 3 1.061 1125 1260 133 14051482156 1543 1728 1816 1907 2000 2.097 2.197 2.300 4102 1170 1262 301,464 1574 1689 18119392.074 2215 2364 2520 2684 2853.0338424 5 1.104 1.217 1.338 1469 1611 1.762 1925 2.100 22882488 2703 2932 3176 343 3713 007 5.378 6 1.126 1.265 1.419 1.587 1.772 1974 2195 2436 2700 298, 3297 3.635 Lan 4S8-482) ,so 71.149 1.316 1.504 1.714 1.949 2.211 2502 2826 3185 3.583 4.0234.5085042 5.629 2756.983 8 1.172 1.369 1.594 1.851 2.1442.47285332783759 4.300 4.908 5590 6353 7.206 9 1.195 .423 1.689 1.999 2.358 2.773 3.252 3803 4435 5.1605.876.9318.005 9.223 10.604 12.166 10 1.219 1480 1.7912.159 2.594 3.106 3707 4.411 5234 6.2 7.305 8594 10.086 11.806 13.786 16.060 11 1.243 .539 18982.332 2.853 3.479 4226 5.1176176 7430 8912 10557 1270815.1117922 21.199 40496 11 12 1268 1.601 012 2.518 3,138 3.896 4818 5936 7288 8.916 10.872 13215 16012 19.343 23298 27.983 56.59412 13 1.294 1665 2.133 2.720 3.452 4.363 5492 6886 8599 10699 13264 16.38 20.175 24.759 30288 36.937 79.37113 14 1.319 1.732 2261 2937 3.794.887 6.2617988 10147 12.839 16182 20319 25421 31.69139374 48.757 11.120 14 15 1.346 1.801 2.397 3.172 4.177 5.474 7.138 9256 11.974 15407 19742 25196 32 031 0555 511K fL359 15 68 16 1.373 1.873 2540 3.426 4.595 6.130 813710748 14129 18.488 2408 3123 40.358 51923 66542 84.954 217.795 16 17 1400 1948 2693 3.700 5.054 6.866927612468 16.672 22.186 29.384 38.741 50851 66.461 86.504 12139 304.913 17 18 1.428 2.026 2.854 3.996 5.560 7.690 10.575 14.463 1957326.62335.849 4803964.07285.071112455148.024 426.879 18 19 1.457 2.107 3,026 4316 6.116 8.613 1205 16777 a214 31948 43736 59568 Ena toBE90 14E92 1S5391 5gR30 20 1.486 2.19 3.207 4661 6727 9.646 13743 19451 27393 38.338 53.358 73864 101.721 13930 190050 257.916 836 583 20 21 1516 2.279 3.400 5.0347.400 10.804 566822574 32324 46.005 65.096 91.592 128.169 178.406 247065 340.449 1171 356 21 22 1.546 2.300 3604 5437 8.140 12.100 17.861 26.186 142 55206 79418 113574 161492 228360 321.184 449 393 1609 898 22 23 1.577 2.465 3.820 5.871 8.954 13.552 20.382 30.376 45.008 66.247 96.889 140831 203E 292300 4tSg ,gMg 22%.95 24 1.608 2563 4049 6.341 9.850 15.179 23212 35236 53.109 79.497 118.205 17463125385 374.144 512801 783.023 3214200 24 25 1641 2666 4.2926.848 10.835 17.000 26.462 40.874 62669 95.396 144.210 216.542 323.045 478.905 705641 1033.590 4499.880 25 26 1.673 2.772 4.549 7.396 11.918 19.040 30.167 47414 73949 114.475 17593 268512 407.037 61298 917333 1364.339 620.831 26 27 1.707 2.883 4.822 7.988 13110 21.325 34390 55.000 87260 13730 214642 02.955 52ia T4638 "g2em 1800192 , B um, 20 28 1.741 2999 5.112 8627 14.421 23.884 39204 63800 102967 164 845 261 864 412864 646212 10041550293 2377 224 12947 570 28 29 1.76 3119 5418 9317 5863 26.750 44.693 74009 121501 97.814 319474 511952 814228 1285550 2015.38 3137935 17286.73729 30 1.811 3243 5743 10063 17.449 29,960 50.950 85850143371 2n376 30975 63t 820 102ssa T645ss 21396 4t2015 30 35 2000 3.946 7.686 14.785 28.102 52.800 98.100 180314 327997 590.668 1053.402 1881.054 3258.135 5653.911 9727.860 16599.217 130161.11235 40 2208 4801 10.286 21.725 45.259 93.051 188881 378.721 750378 1469.772 2847.038 5455.913 10347.175 19126.689 36118865 66520.767 700037 697 40 4.7588 200 se 990 SOB 10 47 gg 13 59 7 80 4 5 32 26 00 96 34 41 48 8% 2 2 2 2 2 19 73 28