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 $76,600 $187,000

Estimated life 8 years 8 years

Salvage value 0 0

Estimated annual

cash inflows $20,400 $40,400

Estimated annual

cash outflows $5,190 $10,130

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