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 isnt equipped to do. Estimates regarding each machine are provided below. Machine A Machine B Original cost $75,500 $180,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $20,000 $40,000 Estimated annual cash outflows $5,000 $10,000

Calculate the net present value and profitability index of each machine.

Assume a 9% discount rate Machine A Machine B Net present value Profitability index

Which machine should be purchased?