?Chapter 24 Homework xy rel WileyPLUS \'G TIc Corp lsConsidering: Net Present Va

Question

?Chapter 24 Homework xy rel WileyPLUS 'G TIc Corp lsConsidering: Net Present Value (NPV) × × (- ? ? Secure ! https//edugen.wileyplus.c uni WileyPLUS Kimmel, Accounting, 6e TER VERSION BACK Exercise 24-4 [x] Your answer is incorrect. Try again. 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 Chapter 24 Homework Assignment Exercise 24-2 machine are provided below. MachineA $76,600 3 years Machine B $190,000 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated nnual cash outnovs Review Score $20,000 $5,140 $40,500 Objective $10,100 Calculate the net present value and pro tability 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 0 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 Machin B Net present value Profitability index Which machine should be purchased? should be purchased. LINK TO TEXT LINK TO TEXT Question Attempts: 1 of 5 used SAVE FOR LATER SUBMIT ANSWER O Type here to search 10:08 AM 7/16/2018

Explanation / Answer

Machine A: Present value of net cash flows 82247 =(20000-5140)*5.53482 Less: Investment 76600 Net present value 5647 Profitability index = 82247/76600= 1.07 Machine B: Present value of net cash flows 168259 =(40500-10100)*5.53482 Less: Investment 190000 Net present value -21741 Profitability index = 168259/190000= 0.89 Machine A should be purchased

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