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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.

  

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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:

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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.

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Fill in the schedule below for the next four years.


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Appendix D Present value of an annuity of $1, PV FA
Percent
2%
5%
6%
7%
8%
9%
10%
11%
12%
0.926
0.909
0.901
1.942
1.886
1.690
2.829
2.723
2.577
2.531
2.444
2.402
3.902
3.717
3.387
3.312
3.240
3.102
3.037
4.713
4.329
3.993
5.601
5.417
5.076
4.917
4.76
4.48
4.355
4.23
4.111
6.230
5.033
4.712
6.733
6.463
5.971
5.535
4.968
7.108
6.247
5.995
5.537
5.328
7.360
6.418
5.650
7.139
11.255
10.575
8.863
8.384
7.161
6.814
6.492
12.134
11.348
10.635
9.394
8.853
7.904
7.487
7.103
6.750
6.424
13.004
12.106
11.296
10.563
9.899
8.244
6.982
6.628
11.938
10.380
9.712
3.559
14.718
13.578
12.561
10.838
10.106
8.851
6.974
7.120
13.754
12.659
10.828
10.059
9.372
8.756
7.250
17.226
15.678
14.324
13.134
12.085
11.158
9.604
8.950
7.36
20
18.046
16.351
14.877
13.590
12.462
11.470
10.594
9.818
9.129
7.963
7.469
17.413
10.675
30
22.396
19.600
17.292
12.409
11.258
9.427
27.355
23.115
19.793
17.159
15.046
13.332
11.925
10.757
9.779
8.244
Percent
14%
15%
16%
17%
18%
19%
20%
25%
30%
35%
0.862
0.855
0.667
1.668
1.626
1.605
1.56
1.547
1.528
1.361
1.289
2.246
2.174
2.140
2.106
1.952
1.816
1.589
1.605
2.974
2.798
2.166
1.849
3.517
3.433
3.127
3.058
2.991
2.689
2.436
2.035
1.737
3.498
2.951
2.643
2.385
1.824
3.706
4.487
4.207
4.078
3.954
3.837
3.329
2.925
2.598
1.922
5.132
4.45
4.303
4.163
4.031
3.463
3.019
2.665
2.379
1.948
4.494
3.571
3.092
1.965
5.426
5.216
4.833
5.687
5.453
4.327
3.656
5.42
4.611
3.190
2.779
2.456
1.985
5.842
5.583
4.910
4.533
3.780
3.223
2.799
1.990
6.462
5.324
4.876
4.675
3.859
3.268
1.995
5.668
5.405
5.162
4.938
4.730
3.887
1.997
5.749
4.988
4.775
6.840
6.467
5.534
4.812
3.928
3.304
2.844
2.494
1.999
6.938
5.584
5.070
3.942
3.311
2.848
7.025
5.929
5.628
5.101
1.999
25
4.948
3.985
3.329
30
6.177
5.829
5.517
5.235
4.979
3.995
2.857
7.634
6.233
5.871
5.548
5.258
4.997
3.333
2.000
6.661
6.246
5.880
4.999
4.000
2.857
2.500

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Year 1 Year 2 Year 3 Year 4
Earnings before depreciation and taxes
Depreciation
Earnings before taxes Taxes Earnings after taxes Depreciation Cash flow

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