Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 isnt equipped to do. Estimates regarding each machine are provided below.

Machine A Machine B
Original cost $76,900 $186,000
Estimated life 8 years 8 years
Salvage value 0 0
Estimated annual cash inflows $19,600 $39,800
Estimated annual cash outflows $5,150 $10,080

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 0 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.)

Machine A Machine B
Net present value enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places
Profitability index enter the Profitability index rounded to 2 decimal places enter the Profitability index rounded to 2 decimal places

Which machine should be purchased?

Machine A should be purchased Machine B should be purchased.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Cost Accounting

Authors: William Lanen, Shannon Anderson, Michael Maher

3rd Edition

9780078025525, 9780077517359, 77517350, 978-0077398194

More Books

Students also viewed these Accounting questions