Johnson Company is considering purchasing one of two new machines. The following estimates are available for each machine:
The company's minimum required rate of return is 9%.
Instructions
(a) Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each machine.
(b) Which machine should be purchased?

Question

Johnson Company is considering purchasing one of two new machines. The following estimates are available for each machine:  
The company's minimum required rate of return is 9%.  
Instructions
(a) Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each machine.
(b) Which machine should be purchased?

Quizplus · Accepted Answer

The Answer of Johnson Company is considering purchasing one of two new machines. The following estimates are available for each machine:  
The company's minimum required rate of return is 9%.  
Instructions
(a) Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each machine.
(b) Which machine should be purchased?

Johnson Company Is Considering Purchasing One of Two New Machines