Explore BrainMass

# 12-14 Pan American Bottling purchase of machine: NPV, IRR, accept the project?

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

12/14. 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?

Â© BrainMass Inc. brainmass.com March 4, 2021, 6:01 pm ad1c9bdddf

#### Solution Preview

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

We can use EXCEL command "NPV(10%, 15000,...,5000) to calculate the PV of all the cash flows(discounted at 10%):
Year CF
1 ...

#### Solution Summary

The calculations and explanations are more than adequate to explain the problems.

\$2.49