7 Investment Appraisal Techniques—Mutually Exclusive Options. Meadowvale Hospital is attempting to choose the better of two mutually exclusive options to expand theatre operating capacity. The data for each option is as follows:

Option 1

£

Option 2

£

Initial investment 80,000 100,000 Increased annual running costs 40,000 pa 30,000 pa If each option is assumed to last ten years, and the discount rate is 6 per cent, which option should be chosen? What other, non-financial, factors might influence the final decision?