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 B $270,000 10 years -0- $60,000 $15,000 Machine A $113,250 10 years -0- $30,000 $7,500 Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Instructions (a) Calculate the net present value and profitability index of each mach ine. 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: Machine C $250,000 10 years $30,000 $45,000 $10,000 Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows (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. TARLE 2 Present Value of 1 (n) Periocs 4 % 5% 6% 8% 9% 10% 11% 12% 15% 96154 92456 88900 85480 82193 95238. .90703 86384 82270 78353 94340 92593 85734 79383 73503 68058 91743 84168 J7218 708430 90909 82645 75132 68301 90090 86957 75614 65752 57175 49718 89286 79719 27 89000 81162 73119 65873 59345 83962 79209 74726 71178 63552 56743 64993 62092 79031 75992 73069 .74622 .71068 67684 70496 66506 62741 59190 55839 63017 58349 34027 S0025 46319 59627 54703 50187 A6043 42241 56447 51316 A3233 37594 32690 28426 24719 53464 50663 45235 40388 7 48166 46651 42410 38554 433934 39092 35218 70259 67556 64461 61391 36061 32197 10 11 12 64958 62460 .60057 57748 58468 55684 53032 52679 38753- 35049 31863 28966 42888 39711 36770 31728 28584 25751 28748 25668 22917 20462 18270 21494 18691 J6253 14133 12289 49697 46884 44230 35554 32618 13 14 15 s0507 34046 29925 26333 23199 20900 55526 48102 A1727 31524 27454 23939 16 53391 45811 43630 41552 39573 39365 37136 35034 33051 31180 29189 27027 25187 .23107 21199 19449 17843 21763 19785 17986 16351 18829 16312 14564 13004 11611 10687 17 51337 16963 09293 .08081 07027 49363 18 25025 23171 21455 15282 13768 47464 20 A5639 37689 14864 12403 10367 05110 Series oteauae paments TABLE 4 Present Value of an Annuity of 1 DA (n) Periods 9 % 12%. 15% 4% 5% 6% $% 10% 11% 89286 1.69005 86957 1.62571 2,28323 285498 3.35216 ,96154 95238 94340 1.83339 92593 1.78326 91743 1.75911. 253130 323972 3.88965 90909 1.73554 2.48685 90090 1.71252 2 1.88609 185941 272325 3.54595 4.32948 2.44371 3.10245 240183 3.03735 3.60478 277509 3.62990 2.67301 3.46511 2.57710 3.31213 3 3.16986 3.99271 3.79079 3.69590 4.45182 4.21236 5 3.78448 4.16042 4,48592 5.03295 4.35526 4.86842 4.23054 411141 4.56376 4,96764 5,07569 5.78637 6.46321 7.10782 7.72173 4,91732 5.58238 4.62288 6 524214 600205 471220 5.20637 7 448732 4.77158 5.01877 5.53482 5.99525 6.41766 5.33493 5.14612 6.20979 6.80169 7.36009 5.74664 8 6.73274 532825 565022 5.53705 5.88923 6.24689 6.71008 5.75902 6.14457 743533 8.11090 10 5.23371 5.93770 6.19437 6.42355 6.62817 6.81086 6.49506 6.81369 6.20652 7.13896 7.53608 7,90378 6.80519 8.3064 &86325 9.39357 9.89864 10.37966 7.88687 11 8.76048 5.42062 5.58315 5.72448 5.84737 7.16073 7.48690 649236 6.74987 9.38507 9.98565 8.38384 8.85268 929498 9.71225 12 13 7.10336 698187 7.78615 7.36669 8.24424 10.56312 11.11839 14 7.60608 7.19087 8.06069 8.55948 15 6.97399 7.11963 7.24967 7.36578 746944 5.95424 6.04716 612797 6.19823 7.37916 7.54879 7.70162 7.83929 8.85137 9.12164 9.37189 9.60360 9.81815 782371 8.31256 10.83777 11.27407 11.68959 12.08532 12.46221 10.10590 11.65230 12.16567 12.65930 13.13394 13.59033 16 17 18 8.54363 8.75563 8.95012 9.12855 8.02155 10.47726 8.20141 10.82760 8.36492 8.51356 11.15812 19 625933 796333 11.46992 20
