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 $60,000. The annual cash flows have the following projections:
Year 1 23,000
Year 2 26,000
Year 3 29,000
Year 4 15,000
Year 5, 8000
If the cost of capital is 13 percent, what is the net present value of selecting a new machine?
What is the internal rate of return?
Should the project be accepted? Why?