# Capital Budgeting- NPV, IRR

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?

https://brainmass.com/business/capital-budgeting/capital-budgeting-npv-irr-19432

#### Solution Summary

The solution makes a recommendation in a capital budgeting problem based on NPV, IRR criteria.

$2.19