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Calculate the net present value and profitability index

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Question - 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

$78,200

$182,000

Estimated life

8 years

8 years

Salvage value

0

0

Estimated annual cash inflows

$19,800

$39,600

Estimated annual cash outflows

$5,130

$10,180

Required - Calculate the net present value and profitability index of each machine. Assume a 9% discount rate.

Reference no: EM132496967

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