Sheridan Corp. 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 A		Machine B
Original cost		$114,000		$269,500
Estimated life		10 years		10 years
Salvage value		-0-		-0-
Estimated annual cash inflows		$30,100		$59,900
Estimated annual cash outflows		$7,400		$15,000

(a)

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Your answer is correct.

Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negative amounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).)

		Machine A		Machine B
Net present value		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places
Profitability index		enter the profitability index rounded to 2 decimal places		enter the profitability index amount rounded to 2 decimal places

Which machine should be purchased?

Sheridan Corp. should purchase select a machine Machine BMachine A.

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(b1)

Sheridan Corp. did some further research and found one other possible machine that would produce the same type of production efficiencies. The information regarding Machine C is below:

		Machine C
Original cost		$252,900
Estimated life		10 years
Salvage value		$29,800
Estimated annual cash inflows		$45,300
Estimated annual cash outflows		$10,100

Calculate the net present value and profitability index for Machine C. Use an 8% discount rate. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negative amounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).)

Net present value		$enter a dollar amount rounded to 2 decimal places
Profitability index		enter the profitability index rounded to 2 decimal places