Question: The Pan American Bottling Co is considering the purchase of

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.
Year Cash Flow
1 ....... $23,000
2 ....... 26,000
3 ....... 29,000
4 ....... 15,000
5 ....... 8,000
a. If the cost of capital is 13 percent, what is the net present value of selecting a new machine?
b. What is the internal rate of return?
c. Should the project be accepted? Why?

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  • CreatedOctober 14, 2014
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