Tlc corp is considering purchasing one of two new, Ask an Expert

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TLC 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:

Original cost $78,000 $190,000
Estimated life 8 yrs 8 yrs
Salvage value 0 0
Estimated annual cash inflows $20,000 $40,000
Estimated annual cash outflows $5,000 $9,000

Instructions: Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should be purchased?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9974361

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