**Caine Bottling Corporation's Investment Analysis**Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would have a cost of $193,900, with an estimated useful life of 8 years and zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $30,600. Additionally, management believes that the new machine will save the company money due to its expected reliability and reduced downtime. Assume a discount rate of 7%.**Instructions:**1. **Calculate the Net Present Value (NPV):** To calculate the NPV, use the present value factor for the cash flows. If the result is negative, indicate this with a negative sign or parentheses (e.g., -45 or (45)). Use 5 decimal places as shown in the provided factor table, and round the NPV answer to 0 decimal places. - **Net Present Value:** \[ \text{\$} \_\_\_\_\_\_\_\_ \]2. **Evaluate Downtime Reduction:** Determine the reduction in downtime necessary for the project to be acceptable. Round this value to 0 decimal places. - **Downtime Reduction:** \[ \text{\$} \_\_\_\_\_\_\_\_ \]**Note:** Click the link to view the factor table for detailed calculation guidance.

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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Ivanhoe Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck(not the least of which is that it runs). The new truck would cost $57,186. Because of the increased capacity, reduced maintenancecosts, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eight years, thecompany will sell the truck for an estimated $27,500. Traditionally, the company has used a general rule that it should not accept aproposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Gary Smith, a new manager, hassuggested that the company should not rely only on the payback approach but should also use the net present value method whenevaluating new projects. The company's cost of capital is 8%.Calculate net present value and cash payback period
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