1-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 $75,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. If the cost of capital is 11 percent, what is the net present value of selecting a new machine? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Net Present Value ________
b. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Internal Rate of Return _________%
2-Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $36,000. The annual cash inflows for the next three years will be:
Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the financial calculator method.
a. Determine the internal rate of return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Internal Rate of Return ________%
3-Telstar Communications is going to purchase an asset for $520,000 that will produce $250,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12-12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 35 percent tax bracket.
Fill in the schedule below for the next four years.