BAK Corp. is considering purchasing one of two new diagnostic machines. Either m

Question

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 machine are provided below Machine A $75,700 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine B $182,000 8 years 0 $39,700 $10,050 $20,300 $4,870 ick her view abl 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 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 Machine B Net present value Profitability index

Explanation / Answer

Machine A: Present value of net cash inflows 85402 =(20300-4870)*5.53482 Initial investment -75700 Net present value 9702 Profitability index 1.13 =85402/75700 Machine B: Present value of net cash inflows 164107 =(39700-10050)*5.53482 Initial investment -182000 Net present value -17893 Profitability index 0.90 =164107/182000

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.