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Calculate the net present value

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Problem - Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $175,606 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $34,100. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 12%.

Calculate the net present value.

How much would the reduction in downtime have to be worth in order for the project to be acceptable?

Reference no: EM132085618

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