Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If the net present value is negative, use 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, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, e.g. 12.521.) Net present value Profitability index $ Machine A Machine B
Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If the net present value is negative, use 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, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, e.g. 12.521.) Net present value Profitability index $ Machine A Machine B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
mn.3
Transcribed Image Text:Bonita 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 is not equipped to do. Estimates for each machine are as follows:
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Click here to view the factor table.
Net present value $
Profitability index
Machine A
$78,200
8 years
Which machine should be purchased?
0
$23,300
$4,800
Machine A
Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If the net present value is negative,
use 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, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places,
e.g. 12.521.)
Machine B
$190,400
8 years
$40,500
$8,900
LA
Machine B
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