Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pharoah Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs

image

Pharoah 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 Estimated life $74,600 $182,000 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $20,000 $40,200 Estimated annual cash outflows $5,170 $10,190 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 O 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 Net present value Profitability index Which machine should be purchased? Machine A should be purchased. 82081 Machine B 166100 1.1 .9126 SUPPORT

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Answer calculations for the net present value NPV and profitability index for each machine For Machi... 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_2

Step: 3

blur-text-image_3

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

Managerial Accounting Tools for business decision making

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

5th edition

470506954, 471345881, 978-0470506950, 9780471345886, 978-0470477144

More Books

Students also viewed these Accounting questions