Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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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
4
Cash Flow
$ 21,000
24,000
28,000
14,000
9,000
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.
Internal rate of return
%6
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