Angler Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below. Machine A $113,250 10 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine B $270,000 10 years -0- $60,000 $15,000 $30,000 $ 7,500 Instructions (a) Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Which machine should be purchased? (b) Angler Corp. did some further research and found one other possible machine that would produce the same type of production efficiencies. The information regarding Machine C is below: Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine $250,000 10 years $ 30,000 $ 45,000 $ 10,000 (1) Calculate the net present value and profitability index for Machine C. Use an 8% discount rate. (2) Rank the investments based on net present value. Which machine would be chosen based on this calculation? (3) Rank the investments based on profitability index. Which machine would be chosen based on this calculation? (4) Which machine should be purchased based on all the information provided? Discuss your reasons why. TABLE 1 Future Value of 1 Periods 4% 1.04000 1.08160 1.1296 1.16206 1.21665 10% 110000 1.21000 1.18810 1.29503 1.41158 1.52862 2.31.306 1.26502 1.31593 1.67710 1.8204 1.42031 1.48024 5% 6% 1.05000 1 06000 1.08000 1.12100 1.100 1.15763 1191021 .25971 1.21551 1.25248 138049 1.27628 13 1. 4 3 1.440101 41 1.482 1 5 7 1.40710 1.50363 1.71382 1 59385 1.85093 1.55133 168948 1.79085 2.15892 1.71034 1. SORDO 20164 201220 251817 1.89565 210293 2.71962 1.97993 2.260902 .93719 239656 3.17217 3.17217 21827 2.54035 3.42594 2.29202 2.69277 3.70002 2.40662 285440 2.52695 3.02580 431570 265330 320714 4 096 217189 2.36736 2.5063 281267 1.46410 1 61051 1.TTI56 1.96872 214359 235795 2.99374 25312 3.13843 345227 379730 4.17725 450197 111000 12010 1.36763 1.5107 1.68SOS 187001 207616 210454 2.55803 228192 2.15176 349545 3. 328 431044 4.78459 5.31089 5.89509 6.555 7.26334 R06231 12% 1.15000 112000 1.32250 1.25440 1.52088 1.40493 1.57352 1.74901 201136 1.76234 19712 266002 221068 30902 2.47596 2.77308 3.51788 404556 3.10585 3.47RSS 465229 3.9598 5.35025 4.36349 6.15279 707571 4711 5.47357 813706 9.35762 6.13019 6.96604 10.76126 76997 12.37545 14.23177 8.61276 96462916.36654 1 50945 1.66507 1.73168 3134173 364248 397031 4.32763 4.71712 5.14166 5.60441 1.94790 5.59992 6.11591 6.72750 TABLE 2 Future Value of an Annuity of 1 10% 15% Periods 100000 204000 315250 431013 4.24646 5.41632 1.000.00 209000 31830 437462 5.63709 697532 839284 9.99747 1149132 13.18079 11% 1.00000 1.00000 210000 2.11000 3031000 3.30210 4.64100 4.70973 6.10510 622780 7.715617 91286 9.48717 9.78327 11.43589 189943 13.57948 14,16397 15.93743 16,72201 12% 1.00000 2.12000 3.37440 4.77923 635285 811519 10 08901 1220969 14.77566 17 54974 1.00000 215000 3.47250 4,99338 6.74238 8.75374 11.06680 13.72682 16.78584 20.30372 6.0191 1.00000 2.08000 2.09000 3.24600 3.27810 450611 4.57313 5.88660 98471 711592 75214 890909.20044 1061662 11.02847 12.45756 13.02104 14.48656 15.19293 1664549 17.56029 1897713 2014072 21.49430 22.95339 24.21492 26.01919 27.15211 29.36092 6.63299 7.99929 9.21423 10.582 9.54911 1100656 12.57789 14 20679 15.91713 17.71298 19 99863 2157856 21.65749 2584037 28 13 1900 32.06595 12.00611 13.9635 15.07581 16.62684 18.29191 20. 6159 21.82453 22 60751 25 61541 27.67123 29.7NOS 18.53117 21.38428 34.52271 27.97498 31.77248 22.71319 26 21164 30.09492 34.40536 14.97164 16.86994 1898214 21.01 507 2327907 25 67253 28 21293 30.90565 30.79999 36.78559 24.13313 28.01911 32.39260 37,27972 30.32428 33.00340 35.94973 39.18995 33.7502336.97351 40.54470 00 37.45034 41.30134 45 59917 50 39593 41.44626 46.01846 51.15909 5697949 45.76196 51.16012 57.275006 420283 24.34928 29.00167 34 35192 40.50471 47.58041 SS.71747 65.07509 7583636 21151 162358 42.75328 48 88167 55.74972 61 41968 72.05244 20 TABLE 3 Present Value of 1 Periods 15%. 114 96154 .92456 5% 95238 90203 79719 M168 94340 200 83962 79709 .74725 2645 751.12 .7901 9540 .82193 .78353 S3 .74622 119 90090 S1162 73119 65873 50345 S54 48166 43393 1092 30218 31728 20584 56447 51316 57175 49718 3233 37994 32600 226 24719 21494 1691 07634 .64 61391 42410 18554 46319 .66506 2741 59190 .55839 52579 40607 4644 44230 ARS 15049 31863 .79031 75992 .73069 20250 .67556 64958 62480 60057 57748 55526 51191 51337 ,49363 .47464 45639 35554 58468 55684 53082 50507 ,48102 14133 12289 07 09293 29925 27454 25187 2010 .21199 31524 2919 27027 25005 23171 2 1455 19365 37136 35034 33051 31180 .45811 43630 41552 .39573 37689 2748 1668 22917 20462 18270 16312 14564 11004 11611 10367 26333 23939 2173 19785 17986 16151 14864 23199 20000 1829 16963 15022 13768 12403 07027 06110 19449 series ote e Dayment TABLE4 Present Value of an Annuity of Periods 96154 188209 2.77509 3.62000 4.45182 1859:41 2.72325 3.54595 4.329,48 94440 1.83339 2.67301 3.46511 4.21236 3% 92593 1.78326 257710 3.31213 3.99271 46299 5.20637 5.74664 .24689 6.71008 52214 6.00205 6.73274 743533 R.11090 491732 5.528 6.20979 6.801696 7.38009 12% 15% 9% 10% 8928686957 91743 90090 9 0909 1.62571 1.69005 1.73554 1.79911 1.71252 240183 2.28323 7.93130 244371 2.48685 285.498 3.03735 3.23972 3.10045 3.16986 3.35216 3.60478 3.79079 3.88965 3.69590 448592 3.78.148 423054 4.35526 4.11141 4.86842 4.56376 4 71220 5.03295 4.16042 5.53482 4.48732 5.14612 5.33493 4.96764 599525 5.75902 5.53705 5.32825 4.77158 6.41766 6.14457 5.88923 565022 5 .01877 6.80519 6.49506 6.20652 5 .93770 5.23371 7.160736.813696.49236 610437 5.42062 7.48690710336 6,74987642355 5.58315 7.78615 7.36669 6.98187 6.62817 5.72448 8.06069 760608 7.19087 6.81086 5.84737 8.31256 7.82371 7.37916 6,97399 5.95424 8.54363 8 ,02155 7.54879 7.11963 6.04716 8,75563 8 .20141 7.70162 724967 6.12797 8.95012 8 .36492 7.83929 736578 6.19823 9.12855 8.51356 7.96333 7.46944 6.25933 5.07569 5.78637 6.46321 7.10782 7.72173 & 30641 8.86325 9.39357 9.89864 10.37966 10.83777 11.27407 11.69959 12.08532 12.46221 8.76018 9.38507 9.98565 10.56312 11.11839 11.65230 12.16567 12.65930 13.13394 13.59033 15 7.88687 7.13896 1384753608 8.89268 7.90378 9.20498 8.24424 9.71225 8.55948 10.10990 8.85137 10.47726 9.12164 10.82760 9.37189 11.15812 9.60360 11.469929.81815 16
