BUSI/320 BUSI320 BUSI 320 The Pan American Bottling Co. is considering the purchase

BUSI 320 The Pan American Bottling Co. is considering the purchase

Question

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 $57,000. 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 $ 21,000
2 24,000
3 28,000
4 14,000
5 9,000

 

a.

If the cost of capital is 11 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.)

 

Net present value $

 

b.

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

 

Internal rate of return %

 

c. Should the project be accepted?
   
 
Yes
No

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