BAK Corp. is considering purchasing one of two new diagnostic machines, Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability Index $77,000 8 years Which machine should be purchased? $19,900 $4,800 Machine A 0 should be purchased. Machine B $188,000 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 8 years 0 $40,200 $9,860 Machine B

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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BAK Corp. is considering purchasing one of two new diagnostic machines, Either machine would make it possible for the company to
bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below.
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Net present value
Machine A
Profitability Index
$77,000
8 years
Which machine should be purchased?
$19,900
$4,800
Machine A
0
should be purchased.
Machine B
$188,000
Click here to view the factor table.
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative,
use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and
profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
8 years
0
$40,200
$9,860
Machine B
Transcribed Image Text:BAK Corp. is considering purchasing one of two new diagnostic machines, Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A Profitability Index $77,000 8 years Which machine should be purchased? $19,900 $4,800 Machine A 0 should be purchased. Machine B $188,000 Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 8 years 0 $40,200 $9,860 Machine B
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