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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 here.

Machine AMachine BOriginal cost$75,500$180,000Estimated life8 years8 yearsSalvage value-0--0-Estimated annual cash inflows$20,000$40,000Estimated annual cash outflows$5,000$10,000

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

Determine internal rate of return.

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