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Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option Awould have an initial lower cost but would require a significant

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Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option Awould 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 6%. Initial cost Annual cash inflows Annual cash outflows Cost to rebuild (end of year 4) Salvage value Estimated useful life Option A $167.000 $71,700 $31.500 $50,200 $0 7 years Option B $271.000 $80.500 $25.800 $0 $8,300 7 years (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) of the net present value is negative, use elther a negative sign preceding the number eg - 45 or parentheses es (45). Round answers for present value and IRR to O decimal places, es 125 and round profitability Index to 2 decimal places, es 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net Present Value Profitability Index Internal Rate of Return Option A $ 96 Option B $ %6

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