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Brooks 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

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Brooks 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 maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows. The company's cost of capital is 5% Initial cost Annual cash inflows Annual cash outflows Cost to rebuild (end of year 4) Salvage value Estimated useful life Option A Option B $179,000 $283,000 $71,700 $81,100 $30,200 $25,800 $50,700 $0 $7.900 7 years 7 years Compute the (1) net present value, (2) prontability 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.) of the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses es (45). Round answers for present value and IRR to O decimal places, eg, 125 and round profitability Index to 2 decimal places, s. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Net Present Value Profitability Index Internal Rate of Return Option AS Options

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