Current Attempt in Progress Ivanhoe 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. Machine A Machine B Original cost $76,600 $190,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $20,000 $40,500 Estimated annual cash outflows $5,140 $10,100 Click here to view PV 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.) Net present value Profitability index Machine A Which machine should be purchased? should be purchased. Save for Later Machine B Attempts: 0 of 1 used Submit Answer
Current Attempt in Progress Ivanhoe 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. Machine A Machine B Original cost $76,600 $190,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $20,000 $40,500 Estimated annual cash outflows $5,140 $10,100 Click here to view PV 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.) Net present value Profitability index Machine A Which machine should be purchased? should be purchased. Save for Later Machine B Attempts: 0 of 1 used Submit Answer
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7EB: An auto repair company needs a new machine that will check for defective sensors. The machine has an...
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Transcribed Image Text:Current Attempt in Progress
Ivanhoe 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.
Machine A
Machine B
Original cost
$76,600
$190,000
Estimated life
8 years
8 years
Salvage value
0
0
Estimated annual cash inflows
$20,000
$40,500
Estimated annual cash outflows
$5,140
$10,100
Click here to view PV 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.)
Net present value
Profitability index
Machine A
Which machine should be purchased?
should be purchased.
Save for Later
Machine B
Attempts: 0 of 1 used Submit Answer
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