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:

Instructions
Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. Which machine should be purchased?

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Machine A $98,000 8 years Machine B $170,000 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows $25,000 $5,000 $40,000 $12,000