Question
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 $69,000. The annual cash flows have the following projections. Calculate your final answer using the formula and financial calculator methods.
Year Cash Flow
1 $32,000
2 37,000
3 34,000
4 27,000
5 13,000
a. If the cost of capital is 11 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started