# Acc346/Acc560 Managerial Accounting: E12-3 TLC Corp. is considering purchasing

Acc346/Acc560 Managerial Accounting

E12-3

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.

Machine A Machine B

Original cost 78,000 190,000

Estimated life (years) 8 8

Salvage value - -

Estimated annual cash inflows 20,000 40,000

Estimated annual cash outflows 5,000 9,000

Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. Round computations for Discount Factor to 5 decimal places.)

E12-3

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.

Machine A Machine B

Original cost 78,000 190,000

Estimated life (years) 8 8

Salvage value - -

Estimated annual cash inflows 20,000 40,000

Estimated annual cash outflows 5,000 9,000

Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. Round computations for Discount Factor to 5 decimal places.)

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