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Need help filling in highlighted area BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the
Need help filling in highlighted area
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 here: Machine A Machine B Original cost 75,500 180,000 Estimated Life 8 years 8 years Salvage Value -0. -0- Estimated Annual cash IN-flows $20,000 $40,000 Estimated Annual Cash OUT-flows $5,000 $10,000 Instructions Calculate the net present value and profitability index of each machine. (Assume a 9% discount rate). Which machine should be purchased? Cash Flows 9% Discount Factor Present Value Machine A Present value of net annual cash flows LESS: Capital Investment Net Present Value Profitability Index (A) = Machine B Cash Flows 9% Discount Factor Present Value Present value of net annual cash flows LESS: Capital Investment Not Present Value Profitability Index (B) = Note: Answer this in complete sentence(s) using good grammar ... AS IF the BIG bosses of your company will review it. (Do NOT write like you (and moi) talk). Your recommendation AND reasons Step by Step Solution
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