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 $77,820 $186,400
Estimated life 8 years 8 years
Salvage value 0 0
Estimated annual cash inflows $19,910 $40,060
Estimated annual cash outflows $5,170 $9,950
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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.)
Machine A Machine B Net present value Entry field with incorrect answer Entry field with incorrect answer Profitability index Entry field with incorrect answer Entry field with incorrect answer Which machine should be purchased?