TLC 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 Machine A Net present value $ $78,500 8 years Profitability index 0 $22,200 $4,900 Machine B Machine A Which machine should be purchased? $190,100 Click here to view PV table. 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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521) 8 years 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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521.) 0 $39,900 $8,850 Machine B
TLC 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 Machine A Net present value $ $78,500 8 years Profitability index 0 $22,200 $4,900 Machine B Machine A Which machine should be purchased? $190,100 Click here to view PV table. 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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521) 8 years 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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521.) 0 $39,900 $8,850 Machine B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:TLC 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
Machine A
$78,500
8 years
Net present value $
Profitability index
0
$22,200
$4,900
Machine B
Machine A
Which machine should be purchased?
$190,100
Click here to view PV table.
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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places,
eg. 12.521.)
8 years
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 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places,
eg. 12.521.)
0
$39,900
$8,850
Machine B
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