Crane 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 here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $77,000 8 years 0 Profitability index $19,900 $4,800 Machine A Which machine should be purchased? 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, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B ✓should be purchased. $188,000 8 years 0 $40,200 $9,860 Machine B
Crane 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 here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $77,000 8 years 0 Profitability index $19,900 $4,800 Machine A Which machine should be purchased? 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, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B ✓should be purchased. $188,000 8 years 0 $40,200 $9,860 Machine B
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 2CE
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![Crane 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 here.
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Net present value
Machine A
$77,000
8 years
0
Profitability index
$19,900
$4,800
Machine A
Which machine should be purchased?
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, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Machine B
should be purchased.
$188,000
8 years
0
$40,200
$9,860
Machine B](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F52749ede-7b68-4cbf-ae55-175824c75dfa%2Fba83416a-9f6e-4441-bf66-0e403d8d68c4%2Faodw3s_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Crane 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 here.
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Net present value
Machine A
$77,000
8 years
0
Profitability index
$19,900
$4,800
Machine A
Which machine should be purchased?
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, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Machine B
should be purchased.
$188,000
8 years
0
$40,200
$9,860
Machine B
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