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FileName: 69e559e13c90cae9cb53da347fdebf0362804eba.xls, Tab: Exercise E123, Page 1 of 2, 12/28/2011, 19:01:46
Name:
Date:
Instructor:
Course:
Machine A
Machine B
Original cost
$78,000
$190,000
Estimated life
8
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?
Project A
X
=
Title
Amount
X
Formula
=
Formula
Title
Amount
X
Formula
=
Formula
Formula
Capital investment
Amount
Net present value
Formula
Hint: Use the =PV Excel formula for the 9% Discount Factor.
Profitability index
Project B
X
=
Title
Amount
X
Formula
=
Formula
Title
Amount
X
Formula
=
Formula
Formula
Capital investment
Amount
Net present value
Formula
Hint: Use the =PV Excel formula for the 9% Discount Factor.
Profitability index
Enter your text answer here.
Managerial Accounting, 3
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 Winter '07
 LeonardA.Bacon
 Managerial Accounting

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