Solution-Calculate the net present value of the new machine

Calculate the net present value of the new machine

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Reference no: EM133055960

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 cost of this machine is $250,000 and is expected to have a useful life of 5 years, with a terminal disposal value of $10,000. Additional working capital of $25,000 is needed to keep the machine running efficiently, but this investment is fully recoverable at the end of the project. The company uses the straight-line depreciation method for its non-current assets, and its required rate of return is 10%. The annual cash flows have the following projections.

Year	Cash Flow
1	$80,000
2	100,000
3	80,000
4	60,000
5	20,000

Required -

(a) Calculate the payback period of the new machine.

(b) Calculate the net present value (NPV) of the new machine.

Reference no: EM133055960

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Calculate the net present value of the new machine

Reference no: EM133055960

Reference no: EM133055960

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