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Carla Vista Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require

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Carla Vista 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%. Click here to view thie factor table. 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 withalternative discount rates to arrive at a net present value of zero.) (If the net present value is negative, use either a negative sign preceding the number eg - 45 or porentheses eg (45). Round answers for present value and IRR to O decimal ploces, eg. 125 and round profitability index to 2 decimal ploces, es. 12.50. For calculation purposes, use 5 decimal places as displayed in the foctor table provided.) TABLE 1 Future Value of 1 TABLE 2 Future Value of an Annuity of 1 TABLE 3 Present Value of 1 TABL.E 4 Present Value of an Annuity of 1

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