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 A Original cost Estimated life $74,000 Machine B $179,000 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $19,500 $39,500 Estimated annual cash outflows $4,800 $9,800 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to O decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Profitability index Machine A Machine B (n) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 .96154 .95238 .94340 .93458 .92593 .91743 .90909 .90090 .89286 .86957 2 .92456 .90703 .89000 .87344 .85734 .84168 .82645 .81162 .79719 .75614 3 .88900 .86384 .83962 .81630 .79383 .77218 .75132 .73119 .71178 .65752 4 .85480 .82270 .79209 .76290 .73503 .70843 .68301 .65873 .63552 .57175 5 .82193 .78353 .74726 .71299 .68058 .64993 .62092 .59345 .56743 .49718 6 .79031 .74622 .70496 .66634 .63017 .59627 .56447 .53464 .50663 .43233 7 .75992 .71068 .66506 .62275 .58349 .54703 .51316 .48166 .45235 .37594 8 .73069 .67684 .62741 .58201 .54027 .50187 .46651 .43393 .40388 .32690 9 .70259 .64461 .59190 .54393 .50025 .46043 .42410 .39092 .36061 .28426 10 .67556 .61391 .55839 .50835 .46319 .42241 .38554 .35218 .32197 .24719 11 .64958 .58468 .52679 .47509 .42888 .38753 .35049 .31728 .28748 .21494 12 .62460 .55684 .49697 .44401 .39711 .35554 .31863 .28584 .25668 .18691 13 .60057 .53032 .46884 .41496 .36770 .32618 .28966 .25751 .22917 .16253 14 .57748 .50507 .44230 .38782 .34046 .29925 .26333 .23199 .20462 .14133 15 .55526 .48102 .41727 .36245 .31524 .27454 .23939 .20900 .18270 .12289 16 .53391 .45811 .39365 .33873 .29189 .25187 .21763 .18829 .16312 .10687 17 .51337 .43630 .37136 .31657 .27027 .23107 .19785 .16963 .14564 .09293 18 .49363 .41552 .35034 .29586 .25025 .21199 .17986 .15282 .13004 .08081 19 .47464 .39573 .33051 .27615 .23171 .19449 .16351 .13768 .11611 .07027 20 .45639 .37689 .31180 .25842 .21455 .17843 .14864 .12403 .10367 .06110
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