What is the net present value of selecting a new machine

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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 $66,000. 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      $28,000

2       28,000

3        28,000

4         33,000

5          11,000

Question 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.)

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

Question c. Should the project be accepted?

  • Yes
  • No

Reference no: EM132504620

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