Reference no: EM132808217

Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $205,900 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 $31,300. 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 6%. Click here to view PV table.

Problem 1: Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.)

Problem 2: How much would the reduction in downtime have to be worth in order for the project to be acceptable?