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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
E12-4 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.
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|
 |
Machine A |
 |
Machine B |
|
Original cost |
$78,000 |
 |
$190,000 |
|
Estimated life |
8 years |
 |
8 years |
|
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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Nov 09 2015 12:42 PM
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