Burlington

Cola is considering the purchase of a special-purpose bottling machine for

$28,000.

It is expected to have a useful life of

4

years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs

Year |
Amount |

Year 1 |
$12,000.00 |

Year 2 |
10,000 |

Year 3 |
9,000 |

Year 4 |
8,000 |

Total |
$39,000.00 |

Burlington

Cola uses a required rate of return of

20%

in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year-end except for initial investment amounts.

__Present Value of $1 table__

__Present Value of Annuity of $1 table__

__Future Value of $1 table__

__Future Value of Annuity of $1 table__

Calculate the following for the special purpose bottling machine:

**1.** Net present value. (Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.)

1. |
Net present value |

2. |
Payback period |

3. |
Discounted payback period |

4. |
Internal rate of return (using the interpolation method) |