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) |