Problem 12-18 (Algo) Net present value and internal rate of return methods [LO12-4] The Pan American Bottling Company is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $55,000. 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 $ 28,000

2 26,000

3 26,000

4 31,000

5 12,000

If the cost of capital is 15 percent, what is the net present value of selecting a new machine? Note: Do not round intermediate calculations and round your final answer to 2 decimal places.

Net Present Value:_______________________

What is the internal rate of return? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Internal rate of return: ___________

Should the project be accepted? multiple choice Yes No