TLC 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 is not equipped to do. Estimates for each machine are as follows:     Machine A Machine B Original cost   $78,300 $190,100     Estimated life   8 years 8 Years     Salvage value   0 0     Estimated annual cash inflows   $24,700 $ 39,900     Estimated annual cash outflows   $5,150 $9,000       1. Calculate the net present value and profitability index of each machine A & B. Assume a 10% discount rate.

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TLC 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 is not equipped to do. Estimates for each machine are as follows:

    Machine A Machine B
Original cost   $78,300 $190,100    
Estimated life   8 years 8 Years    
Salvage value   0 0    
Estimated annual cash inflows   $24,700 $ 39,900    
Estimated annual cash outflows   $5,150 $9,000    

 

1. Calculate the net present value and profitability index of each machine A & B. Assume a 10% discount rate. 

 

 

 

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