Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has an
estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual
cash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expected
to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 7%.
Click here to view the factor table.
Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg
(45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places,
eg. 125.)
Net present value
$
$
How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to O decimal
places, e.g. 125.)
11178
1962
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