Swifty Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company toproduce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below:Machine AMachine BOriginal cost$113,400$270,000Estimated life10 years10 yearsSalvage value-0--0-Estimated annual cash inflows$29,700$60,400Estimated annual cash outflows$7,500$15,000(a)Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (Round present valuefactor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negativeamounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).)Machine AMachine B

Net present value = Present value of net annual cash flow - Initial investment Present value of net…

produce its products more efficiently than it is currently equipped to do. Estimates regarding eac Machine A Machine B Original cost $113,400 $270,000 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,400

produce its products more efficiently than it is currently equipped to do. Estimates regarding eac Machine A Machine B Original cost $113,400 $270,000 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,400

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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