Solution-Net present value of selecting a new machine

Net present value of selecting a new machine

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Reference no: EM132455545

Problem: 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 $72,000. 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 $ 35,000

2 38,000

3 35,000

4 28,000

5 12,000

a. If the cost of capital is 12 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.)

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

c. Should the project be accepted?

Reference no: EM132455545

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Net present value of selecting a new machine

Reference no: EM132455545

Reference no: EM132455545

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