Crane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,900 $278,300 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,100 Estimated annual cash outflows $7,600 $14,800 Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Machine A Machine B Net present value top row, profitability index bottom row Which machine should be purchased? Crane Corp. should purchase select a machine
Crane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,900 $278,300 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,100 Estimated annual cash outflows $7,600 $14,800 Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Machine A Machine B Net present value top row, profitability index bottom row Which machine should be purchased? Crane Corp. should purchase select a machine
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Crane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below:
|
Machine A
|
Machine B
|
|||
|---|---|---|---|---|
|
Original cost
|
$113,900 | $278,300 | ||
|
Estimated life
|
10 years | 10 years | ||
|
Salvage value
|
-0- | -0- | ||
|
Estimated annual
|
$29,700 | $60,100 | ||
|
Estimated annual
|
$7,600 | $14,800 |
Calculate the
|
Machine A
|
Machine B
|
|||
|---|---|---|---|---|
Net present value top row, profitability index bottom row
Which machine should be purchased?
| Crane Corp. should purchase select a machine . |
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