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Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $255,800 and has an estimated useful life of 8
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $255,800 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $37,800. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 5%. Click here to view PV table. Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.) Net present value $ How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.) $ (n) Periods 0 1 2 3 4 5 4% 1.00000 1.04000 1.08160 1.12486 1.16986 1.21665 5% 1.00000 1.05000 1.10250 1.15763 1.21551 1.27628 7 8 9 10 1.26532 1.31593 1.36857 1.42331 1.48024 1.34010 1.40710 1.47746 1.55133 1.62889 1 2 3 4 5 13 1.53945 1.60103 1.66507 1.73168 1.80094 1.71034 1.79586 1.88565 1.97993 2.07893 15 16 17 18 19 20 1.87298 1.94790 2.02582 2.10685 2.19112 2.18287 2.29202 2.40662 2.52695 2.65330
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