b. Compute the net present value of the commuter service. (HOUT d. What should Lon conclude from these computations? P12.3 (LO 2, 3, 4), AN Service Frankfurt Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significan expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its main. tenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a residual value at the end of its useful life. The following estimates were made of the cash flows The company's cost of capital is 8%. Option A l Option B Initial cost 160,000 227,000 Annual cash inflows 71,000 80,000 Annual cash outflows 30,000 31,000 Cost to rebuild (end of year 4) 50,000 0 Residual value O 8,000 moldo19 Estimated useful life 7 years 7 years Instructions a. Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (Hint: To solve for internal rate of return, experiment with alternative discount rales to arrive at a net present value of zero.) b. Which option should be accepted? a new tow truck. The P12.4 (LO 2, 3), E Service Jane's Auto Care is considering the purchase of a new tow tru garage does not currently have a tow truck, and the 60,000 price tag for a new truck would represent maior evnenditure lane Austen owner of the cara hac camniled the estimates shown below les shown below in trying