BAJ Corp, is considering purchasing one of two new machines. Either machine woul

Question

BAJ Corp, is considering purchasing one of two new 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. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use aither 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.) Which machine should be purchased?

Explanation / Answer

Machine A 0 1 2 3 4 5 6 7 8 Original Cost -78420 Net Cash Flows 15420 15420 15420 15420 15420 15420 15420 15420 PVF @ 9% 1 0.917 0.842 0.772 0.708 0.65 0.596 0.547 0.502 -78420 14140.14 12983.64 11904.24 10917.36 10023 9190.32 8434.74 7740.84 NPV 6914.28 PI 0.08817 Machine B 0 1 2 3 4 5 6 7 8 Original Cost -180700 Net Cash Flows 30050 30050 30050 30050 30050 30050 30050 30050 PVF @ 9% 1 0.917 0.842 0.772 0.708 0.65 0.596 0.547 0.502 -180700 27555.85 25302.1 23198.6 21275.4 19532.5 17909.8 16437.35 15085.1 NPV -14403.3 PI -0.07971 Machine A Should be purchased due to positive NVP and PI

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.