Question: Bailey Corporation is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more

Bailey Corporation is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do.Estimates regarding each machine are provided below:

Machine AMachine B

Original cost$113,250$270,000

Estimated life10 years10 years

Salvage value-0--0-

Estimated annual cash inflows$30,000$60,000

Estimated annual cash outflows$7,500$15,000

1.Calculate the net present value and profitability index of each machine.Assume an 8% discount rate.Which machine should be purchased?

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