Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Sheridan 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.
Machine A
$78,200
8 years
0
$19,800
$5,130
Machine B
$182,000
8 years
0
$39,600
$10,180
Transcribed Image Text: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.)
Net present value
Profitability index
Machine A
Which machine should be purchased?
should be purchased.
Machine B
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