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.

Instructions
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should bepurchased?

Transcribed Image Text:

Machine A Mchine B $75,500 $180,000 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows 8 years $20,000 $5,000 $40,000 $10,000