Question
Cullumber Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that
Cullumber 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 here.
Machine A | Machine B | ||||
---|---|---|---|---|---|
Original cost | $75,700 | $189,000 | |||
Estimated life | 8 years | 8 years | |||
Salvage value | 0 | 0 | |||
Estimated annual cash inflows | $19,800 | $39,800 | |||
Estimated annual cash outflows | $4,990 | $10,100 |
Click here to view the factor 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?
select a machine Machine BMachine A should be purchased. |
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