Question
Pan American Bottling Co. is considering the purchase of a new machine that would increase bottling speed and save money. The net cost of this
Pan American Bottling Co. is considering the purchase of a new machine that would increase bottling speed and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
Year | Cash flow | ||
1 | ps | 26,000 | |
2 | 27,000 | ||
3 | 30,000 | ||
4 | 18,000 | ||
5 | 11,000 | ||
a. If the cost of capital is 7 percent, what is the net present value of selecting a new machine?
(Do not round intermediate calculations and round your final answer to 2 decimal places.)
b. What is the internal rate of return?
(Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.)
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
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