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 Profitability index Which machine should be purchased? select machine A machine B should be purchased.
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 | $74,000 | $179,000 | |||
| Estimated life | 8 years | 8 years | |||
| Salvage value | 0 | 0 | |||
| Estimated annual |
$19,500 | $39,500 | |||
| Estimated annual |
$4,800 | $9,800 |
Click here to view the factor table.
Calculate the
| Machine A | Machine B | ||||
|---|---|---|---|---|---|
| Net present value | |||||
| Profitability index |
Which machine should be purchased?
| select machine A machine B should be purchased. |
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