US

Cola is considering the purchase of a special-purpose bottling machine for

$65,000.

It is expected to have a useful life of

4

years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs:

US Cola uses a required rate of return of

18%

in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts.

cap - X of Requirements ot Calculate the following for the special purpose bottling machine: 1. Net present value 2. Payback period 3. Discounted payback period 4. Internal rate of return (using the interpolation method) 5. Accrual accounting rate of return based on net initial investment (Assume straight-line depreciation. Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate of return.) - X Data table Year Amount Year 1 $ 25,000 Year 2 22,000 Year 3 21,000 20,000 Year 4 $ 88,000 Total Print Done