Problem #1 ACF Soda Company

The CFO of ACF Soda Company is evaluating two bottling systems to use in its plant that produces soft drinks. The costs and the cash flow from these systems are shown below. If the company uses a 15 percent discount rate for all projects, determine which bottling system should be purchased using the net present value (NPV) approach.

ACF Soda Company

Problem #1 Accura Bottling System Fiertan Bottling System Year 0 $(4,123,450) $(3,137,410) Year 1 $1,079,225 $1,275,326 Year 2 $2,358,886 $1,765,726 Year 3 $3,111,497 $2,456,110 Year 4 $3,200,555 $2,500,333

Include a table with all calculations you did for each investment choice. State which investment choice the CFO should recommend and why. Choose one other method (Internal Rate of Return (IRR), Payback Method, and Accounting Rate of Return). Explain the advantages and disadvantages of using this chosen method to analyze the same investment choice. (NOTE: You do not have to calculate the analysis using this other method). State whether you would recommend the NPV method or your other chosen method. Support your recommendation with at least two reasons.