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The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net

The Pan American Bottling Co. 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 $60,000. 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 $ 20,000
2 25,000
3 26,000
4 30,000
5 15,000

a. If the cost of capital is 10 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.)

Net present value

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

Internal rate of return %

c. Should the project be accepted?

Yes
No

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