# Thread: Accounting: net present value?

1. ## 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 $Profitability index Machine B  Net present value$ Profitability index

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

2. ## 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