BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Machine A $76,600 8 years 0 $19,900 $4,890 Machine B $179,000 8 years 0 $40,400 $9,940 Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative,

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Chapter19: Capital Investment
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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.
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Net present value.
Machine A
$76,600
Profitability index
8 years
Which machine should be purchased?
$19,900
$4,890
Machine A
0
Click here to view the factor 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 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.)
should be purchased.
Machine B
$179,000
8 years
0
$40,400
$9,940
Machine B
Transcribed Image Text: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. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value. Machine A $76,600 Profitability index 8 years Which machine should be purchased? $19,900 $4,890 Machine A 0 Click here to view the factor 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 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.) should be purchased. Machine B $179,000 8 years 0 $40,400 $9,940 Machine B
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