Question
Bill Zimmerman is evaluating two new business opportunities. Each of the opportunities shown below has a ten-year life. Bill uses a 10% discount rate. Option
Bill Zimmerman is evaluating two new business opportunities. Each of the opportunities shown below has a ten-year life. Bill uses a 10% discount rate. Option 1 Option 2 Equipment purchase and installation $71,000 $81,560 Annual cash flow $28,000 $30,410 Equipment overhaul in year 3 $4,510 - Equipment overhaul in year 5 - $5,750
1.Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, e.g. 1.2514 and the final answers to 0 decimal places, e.g. 59,991.)
Option 1 Option 2
Net present value $
2.Calculate the profitability index of the two opportunities. (Round answers to 2 decimal places, e.g. 15.25.)
Option 1 Option 2
Profitability Index
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