Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Chapter 12, Problem 12.4E
BAK 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 below.
| Machine A | Machine B | |
| Original cost | $75,500 | $180,000 |
| Estimated life | 8 years | 8 years |
| Salvage value | -0- | -0- |
| Estimated annual |
$20,000 | $40,000 |
| Estimated annual |
$5,000 | $10,000 |
Instructions
Calculate the
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BAK 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 below.
Machine A
Machine B
Original cost
$ 77,500
$ 186,000
Estimated life
8 years
8 years
Salvage value
$ 19,500
$ 39,600
Estimated annual cash inflows
$ 5,040
$ 9,800
Estimated annual cash outflows
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.)
Machine A
Machine B
Net present value
Profitability index
Which machine should be purchased?
should be…
BAK 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 below.
Machine A
Machine B
Original cost
$75,700
$182,000
Estimated life
8 years
8 years
Salvage value
Estimated annual cash inflows
$20,300
$39.700
Estimated annual cash outflows
$4.870
$10.050
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 O decimal places, eg. 125
and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Machine A
Machine B
Net present value
Profitability index
Which machine should be purchased?
should be purchased.
BAK 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 below.
Machine A
Machine B
Original cost
$74,500
$183,000
Estimated life
8 years
8 years
Salvage value
Estimated annual cash inflows
$20,300
$40,200
Estimated annual cash outflows
$5,100
$9,810
Click here to view PV 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 O 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.)
Machine A
Machine B
Net present value
Profitability index
Which machine should be purchased?
v should be purchased.
Chapter 12 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Tom Wells claims the formula for the cash payback...Ch. 12 - Prob. 4QCh. 12 - What is the decision rule under the net present...Ch. 12 - Discuss the factors that determine the appropriate...Ch. 12 - What simplifying assumptions were made in the...Ch. 12 - What are some examples of potential intangible...Ch. 12 - What steps can be taken to incorporate intangible...Ch. 12 - Prob. 10Q
Ch. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - What are the strengths of the annual rate of...Ch. 12 - Prob. 15QCh. 12 - Prob. 16QCh. 12 - Prob. 12.1BECh. 12 - Hsung Company accumulates the following data...Ch. 12 - Thunder Corporation, an amusement park, is...Ch. 12 - Caine Bottling Corporation is considering the...Ch. 12 - McKnight Company is considering two different,...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.1DICh. 12 - Prob. 12.2DICh. 12 - Prob. 12.3DICh. 12 - Prob. 12.4DICh. 12 - Prob. 12.5DICh. 12 - Prob. 12.1ECh. 12 - Doug's Custom Construction Company is considering...Ch. 12 - Prob. 12.3ECh. 12 - BAK Corp. is considering purchasing one of two new...Ch. 12 - Bruno Corporation is involved in the business of...Ch. 12 - BSU Inc. wants to purchase a new machine for...Ch. 12 - Iggy Company is considering three capital...Ch. 12 - Prob. 12.8ECh. 12 - Legend Service Center just purchased an automobile...Ch. 12 - Vilas Company is considering a capital investment...Ch. 12 - Drake Corporation is reviewing an investment...Ch. 12 - U3 Company is considering three long-term capital...Ch. 12 - Prob. 12.2APCh. 12 - Brooks Clinic is considering investing in new...Ch. 12 - Jane's Auto Care is considering the purchase of a...Ch. 12 - Prob. 12.5APCh. 12 - Prob. 12CDCh. 12 - Luang Company is considering the purchase of a new...Ch. 12 - Prob. 12.2BYPCh. 12 - Tecumseh Products Company has its headquarters in...Ch. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.5BYPCh. 12 - Prob. 12.6BYPCh. 12 - Prob. 12.8BYP
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