Question

# 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.