PART B

Marigold 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 Machine B Original cost $76,600 $179.000 8 years Estimated life 8 years Salvage value Estimated annual cash inflows $19.900 $4.890 $40.400 $9.940 Estimated annual cash outflows Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 99% 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, eg. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be purchased. Coronado Corporation is reviewing an investment proposal. The initial cost is $105.800. Estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is assumed to equal its book value. There would be no salvage value at the end of the investment's life. Investment Proposal Annual Annual Year Book Value Cash Flows Net Income 1 $69.100 $44.300 $7,600 2 42,900 39.900 13,700 3 20,000 36.000 13.100 4 8.000 29.700 17,700 24.670 16,670 Coronado Corporation uses an 1196 target rate of return for new investment proposals. Click here to view PV table. What is the cash payback period for this proposal? (Round answer to 2 decimal places, eg. 10.50.) Cash payback period years (b) What is the annual rate of return for the investment? (Round answer to 2 decimal places, e.g. 10.50%) Annual rate of return for the investment What is the net present value of the investment? (if the net present value is negative, use either a negative sign preceding the numbere.g.-45 or parentheses eg (45). Round answer to 0 decimal places, eg. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present values