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Calculate the profitability index for the two coffee machine

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Reference no: EM132731446

Mary's Kountry Kitchen on Route 4 is considering purchasing an commercial coffee machine to make coffee during its open hours. There are two manufacturer's under consideration, below are the cost savings (cash flow) from each equipment: (required rate of return 8.5%)

Year Bunn machine Grindmaster-Cecilware

0 -$2,700 -$4,100

1 1,500 900

2 1,300 2,600

3 1,100 3,200

a) Calculate the profitability index for each of the two coffee machines.

b) Based on the PI, which machine should the restaurant purchase?

Reference no: EM132731446

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