Instructions
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 cu
ently isn't equipped to do. Estimates regarding each machine are provided below.
Machine A
Machine B
Original cost
$75,500
$180,000
Estimated life in years
8
8
Salvage value
0
0
Estimated annual cash inflows
$20,000
$40,000
Estimated annual cash outflows
$5,000
$10,000
Tasks:
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should be purchased?
Machine A
Cash Flows
×
9% Discount Facto
=
Present Value
Title
Amount
×
Formula
=
Formula
Title
Amount
×
Formula
=
Formula
Formula
Title
Formula
Title
Formula
Formula
Machine B
Cash Flows
×
9% Discount Facto
=
Present Value
Title
Amount
×
Formula
=
Formula
Title
Amount
×
Formula
=
Formula
Formula
Title
Formula
Title
Formula
Formula
Submission Guidelines:
Your worksheet should be in Microsoft Excel format.
Grading Criteria
Maximum Points
Calculated the net present value of machine A.
10
Calculated the profitability index of machine A.
10
Calculated the net present value of machine B.
10
Calculated the profitability index of machine B.
10
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources (i.e., APA); and displayed accurate spelling, grammar, and punctuation..
10
Total:
50