Question

Machine A $78,300 8 years Machine B $185,000 8 years Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows $19,700 $5,040 $39,900 $9,850 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 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? Machine A should be purchased. Click if you would like to Show Work for this question: Open Show Work

Answer 1

Ans. year Year 1 to 8 net Present value. macchire-A PVF @ 9% Casflows PUCE 5.53482 14,660 81140 3 0050 166,321 Investment requized (78,300) (85000) Present value $2840 -18679 net 1.03 0.89 profitability Index Sou of Future Cash Flows I Initial incestment Machine o should be purchased