Question: The following estimated data has been determined by management: Initial cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine

The following estimated data has been determined by management: Initial cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine 1 Machine 2 Machine 1 $40,000 5 years $1,000 $15,000 $3,900 Profitability Index Machine 2 Click here to view PV table. Calculate the profitability index assuming a 5% discount rate. $50,000 5 years $1,400 $19,800 $6,950 Based on your answer, which project should the company choose?

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