Brief Exercise 24-4 Caine Bottling Corporation is considering the purchase of a

Question

Brief Exercise 24-4 Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $179,788 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $32,700. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 11%. Click here to view PV table.
Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.)
Net present value $
How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.)
$
Brief Exercise 24-4 Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $179,788 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $32,700. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 11%. Click here to vie vtable. Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places e.g. 125. Net present value s How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.) Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

ANSWER:

Particuars annual cash flows present value factor@11% amount 1 32700 0.90090 29459.46 2 32700 0.81162 26540.05 3 32700 0.73119 23909.96 4 32700 0.65873 21540.5 5 32700 0.59345 19405.86 6 32700 0.53464 17482.76 7 32700 0.48166 15750.23 8 32700 0.43393 14189.4 168278.2 initial cost 179788 negative npv 11509.79

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