The Pan American Bottling Company 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 1 2 3 5 Cash Flow $ 22,000 24,000 26,000 32,000 14,000 a. If the cost of capital is 11 percent, what is the net present value of selecting a new machine? Note: 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? round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
The Pan American Bottling Company 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 1 2 3 5 Cash Flow $ 22,000 24,000 26,000 32,000 14,000 a. If the cost of capital is 11 percent, what is the net present value of selecting a new machine? Note: 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? round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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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Transcribed Image Text:The Pan American Bottling Company 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
1
2
3
4
5
Cash Flow
$ 22,000
24,000
26,000
32,000
14,000
a. If the cost of capital is 11 percent, what is the net present value of selecting a new machine?
Note: 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?
Note: Do not round intermediate calculations, Enter your answer as a percent rounded to 2 decimal places.
Intemal rate of return
%
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