The pan american bottling co is considering the purchase of


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 $45,000. The annual cash flows have the following projections:

Year              Cash Flow

1                   $15,000

2                     20,000

3                     25,000

4                     10,000

5                      5,000

a. If the cost of capital is 10 percent, what is the net present value of selecting a new machine?

b. What is the internal rate of return?

c. Should the project be accepted? Why?

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