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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.     Machine A   Machine B

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.     Machine A   Machine B

Essentials Of Investments
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
Section: Chapter Questions
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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.

    Machine A   Machine B  
Original cost   $78,200   $182,000  
Estimated life   8 years   8 years  
Salvage value   0   0  
Estimated annual cash inflows   $19,800   $39,600  
Estimated annual cash outflows   $5,130  

$10,180

 

 

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, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

    Machine A   Machine B  
Net present value   enter a dollar amount rounded to 0 decimal places   enter a dollar amount rounded to 0 decimal places  
Profitability index   enter the profitability index rounded to 2 decimal places   enter the profitability index rounded to 2 decimal places
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