Question: 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 |
A. If the cost of capital is 12 percent, what is the net present value of selecting a new machine?
Net Present Value=?
B. What is the internal rate of return?
Internal Rate of Return= ?