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Tailor Corp. is considering purchasing one of two new diagnostic machines. The following estimated data...

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Accounting

Tailor Corp. is considering purchasing one of two new diagnostic machines. The following estimated data has been determined by management:

Machine 1 Machine 2
Initial cost $40,250 $50,600
Estimated life 5 years 5 years
Salvage value $1,050 $1,600
Estimated annual cash inflows $15,150 $19,950
Estimated annual cash outflows $3,900 $7,100

Click here to view PV table. Calculate the profitability index assuming a 5% discount rate. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answers to 3 decimal places, e.g. 1.251.)

Profitability Index
Machine 1
Machine 2

Based on your answer, which project should the company choose? Machine 1Machine 2

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