Question
Exercise 25-04 BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on
Exercise 25-04
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 | $78,000 | $184,000 | |||
Estimated life | 8 years | 8 years | |||
Salvage value | 0 | 0 | |||
Estimated annual cash inflows | $19,800 | $40,300 | |||
Estimated annual cash outflows | $4,820 | $10,160 |
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. |
Click if you would like to Show Work for this question: | Open Show Work |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started