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 $51,000. 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 $20,000
2 $23,000
3 $27,000
4 $13,000
5 $8,000
If the cost of capital is 12 percent, what is the net present value of selecting a new machine?
What is the internal rate of return?