Question
TLC Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that
TLC 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 is not equipped to do. Estimates for each machine are as follows: Machine A Machine B Original cost $78,500 $190,100 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $22,200 $39,900 Estimated annual cash outflows $4,900 $8,850 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, e.g. 12.521.) 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 index rounded to 3 decimal places enter the index rounded to 3 decimal places Which machine should be purchased? select a machine?
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