Blue Spruce 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 Machine A $238,000 8 years -0- $78,000 $34,000 Machine B $310,000 8 years -0- $93,000 $39,000 Click here to view PV tables. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (Round net present value to the nearest whole dollar, e.g. 5,275 and profitability index to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provie
Blue Spruce 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 Machine A $238,000 8 years -0- $78,000 $34,000 Machine B $310,000 8 years -0- $93,000 $39,000 Click here to view PV tables. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (Round net present value to the nearest whole dollar, e.g. 5,275 and profitability index to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provie
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
Problem 1PS
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Transcribed Image Text:Blue Spruce 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
Machine A
$238,000
8 years
-0.
$78,000
$34,000
Machine B
$310,000
Machine A
8 years
-0-
$93,000
$39,000
Click here to view PV tables.
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (Round net present value to the
nearest whole dollar, e.g. 5,275 and profitability index to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Machine B
Transcribed Image Text:Calculate the net present value and profitability index of each machine. Assume a 99% discount rate. (Round net present value to the
nearest whole dollar, e.g. 5,275 and profitability index to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Net present value $
Profitability index
Machine A
Which machine should be purchased?
Machine B
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