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Calculate the net present value and profitability index

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Reference no: EM131804926

Question - SRB 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 $77,810 $190,000 

Estimated life 8 years 8 years 

Salvage value 0 0 

Estimated annual cash inflows $19,930 $40,270 

Estimated annual cash outflows $4,820 $8,850 

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

Reference no: EM131804926

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