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 $63,000. 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 $ 25,000
2 26,000
3 29,000
4 17,000
5 10,000
a. If the cost of capital is 6 percent, what is the net present value of selecting a new machine? (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? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return %