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Calculate the net present value and profitability index

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Problem - 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 $74,600  $182,000

 Estimated life 8 years  8 years

Salvage value 0  0

Estimated annual cash inflows $20,400  $39,900

Estimated annual cash outflows $5,130  $9,880

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).

Reference no: EM131624766

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