Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would...
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Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $195,500 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 $34,600. Assume a discount rate of 10%.
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $195,500 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 $34,600. 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 10%. Present value factor of cash inflows for 8 years is 5.335. (a) Calculate the net present value. Net Present Value $ (b) Should the company accept the project? Yes or No (Write yes or no (c) How much would the reduction in downtime have to be worth in order for the project to be acceptable? In other words, at what cost point, will this be worth, meaning the annual cash flows will be offset by the cost
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