# Accounting: net present value?

• Apr 21st 2013, 12:00 PM
salma
Accounting: net present value?
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 \$78,190 \$190,200 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows \$19,640 \$40,360 Estimated annual cash outflows \$5,190 \$8,860
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate

achine A
 Net present value \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Profitability index http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif
Machine B
 Net present value \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Profitability index http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif

Any tips on how to do this? I dont know where to start.

• May 22nd 2013, 12:59 PM
Wilmer
Re: Accounting: net present value?
Don'y know where to start?! No teacher?

A: -78,190 + 14450*8: -78190 + 14450[1 - 1/(1.09)^8] / .09 = -78190 + 79978 = 1,788

B: - 190200 + 31500*8: -190200 + 31500[1 - 1/(1.09)^8] / .09 = -190200 + 174347 = -15,853