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 $78,000 $190,000
- Estimated life 8 years 8 years
- Salvage value 0 0
- Estimated annual cash inflows $20,000 $40,000
- Estimated annual cash outflows $5,000 $9,000
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (Round net present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. Round computations for 9% Discount Factor to 5 decimal places. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg 45).)
- Machine ANet present value $
- Profitability index
- Machine BNet present value $
- Profitability index