Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has anestimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annualcash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expectedto be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 7%.Click here to view the factor table.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,eg. 125.)Net present value$$How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to O decimalplaces, e.g. 125.)111781962

YearCash flow 0-193900130600230600330600430600530600630600730600830600Discount rate 7%

Answered: Caine Bottling Corporation is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Kingbird Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of eight years with zero salvage value. Management estimates that the new bottling machine willprovide net annual cash flows of $39,500. Management also believes that the new 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%. Click here to view the factor table. Calculate the net present value. (lf the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.8. 1.25124. 5 Round present value answer to 0 decimal places, e.8. 1,250.) 1. net present value? 2. How much would the reduction in downtime have to be worth in order for the project to be acceptable? Present value of reduction…
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