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

Principles of Accounting Volume 2
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ISBN:9781947172609
Author:OpenStax
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Chapter11: Capital Budgeting Decisions
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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 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                                                                       .
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