Pina Colada Company is considering the purchase of a machine and has compiled the following data:Initial costOne-time training costAnnual maintenance costsAnnual cost savingsSalvage valueThe cash payback period is2.52 years.2.50 years.O 2.28 years.O2.84 years.$18000024800180009000023400

Payback period one of the simple method of capital budgeting and it is period required to recover…

Answered: da Company is considering the purchase…

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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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 $ 77,500 $ 186,000 Estimated life 8 years 8 years Salvage value $ 19,500 $ 39,600 Estimated annual cash inflows $ 5,040 $ 9,800 Estimated annual cash outflows 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 A Machine B Net present value Profitability index Which machine should be purchased? should be…
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da Company is considering the purchase of a machine and has compiled Initial cost One-time training cost Annual maintenance costs Annual cost savings Salvage value The cash payback period is $180000 24800 18000 90000 23400