b. Compute the net present value of the commuter service. (Round to the least one.) 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 significant 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 d Option B Initial cost 160,000 150 227,000 a d 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 0 8,000 ameldo19 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 rates to arrive at a net present value of zero.) b. Which option should be accepted? P12.4 (LO 2, 3), E Service Jane's Auto Care is considering the purchase of a new tow truck. The garage does not currently have a tow truck, and the 60,000 price tag for a new truck would representa major expenditure. Jane Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow the chand hanuman