Question
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
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.
Machine AMachine BOriginal cost$76,000$183,000Estimated life8 years8 yearsSalvage value00Estimated annual cash inflows$20,000$39,600Estimated annual cash outflows$5,140$10,090
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate
Profitability index:
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Financial Accounting Information For Decisions
Authors: John J. Wild
10th Edition
1260705587, 978-1260705584
