Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Blossom 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 here.
Original cost
Estimated life
Salvage value
Estimated annual cash inflows
Estimated annual cash outflows
Click here to view PV table.
Net present value
Profitability index
Machine A
Which machine should be purchased?
$74,000
8 years
Machine A should be purchased
0
$19.500
Machine A
$4,800
Machine B
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 Odecimal places, eg 125 and
profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided)
$179,000
8 years.
0
$39,500
$9.800
Machine B
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Transcribed Image Text:Blossom 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 here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view PV table. Net present value Profitability index Machine A Which machine should be purchased? $74,000 8 years Machine A should be purchased 0 $19.500 Machine A $4,800 Machine B 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 Odecimal places, eg 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) $179,000 8 years. 0 $39,500 $9.800 Machine B
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