The Pam American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The new 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%, what is the net present value of selecting a new machine?

b. What is the internal rate of return (IRR)?


c. Should the project be accepted? Why?

Since you didn't bother to read the rules and want someone else to do your work for you so you can play your play station longer... I am posting the rules.


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