Pharoah Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $199,100 and has an
estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual
cash flows of $35,200. Management also believes that the new bottling machine will save the company money because it is expected
to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 10%. Click here to view PV table.
Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg
(45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to O decimal places,
e.g. 125.)
Net present value
$
How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to O decimal
places, e.g. 125.)
$