David Davis is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. David uses a 12% discount rate. Option 1 Option 2 Equipment purchase and installation $72,000 $82,500 Annual cash flow $28,400 $30,750 Equipment overhaul in year 6 $4,720 Equipment overhaul in year 8 $5,860 Click here to view the factor table. (a) Your answer is correct. 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 O decimal places, e.g. 59,991.) (b) $ Net present value eTextbook and Media Option 1 119037 Option 2 124567 Calculate the profitability index of the two opportunities. (Round answers to 2 decimal places, e.g. 15.25.) Option 2 Option 1 Profitability Index Attempts: unlimited APPENDIX 9.1 Present value of $1 received in n periods. Periods 4% 5% 6% 7% 1 0.9615 0.9524 2 0.9246 3 0.8890 4 0.8548 5 0.8219 8% 9% 10% 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.88.50 0.8772 0.8621 0.8475 0.8333 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7432 0.7182 0.6944 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6407 0.6086 0.5787 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 11% 12% 13% 14% 16% 18% 20% 0.6133 0.5428 0.5921 0.5523 0.5158 0.4823 0.5194 0.4761 0.4371 0.4019 6 67899 10 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4104 0.3704 0.3349 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3538 0.3139 0.2791 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3050 0.2660 0.2326 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.4556 0.3606 0.3329 0.3075 0.2630 0.2255 0.1938 0.3220 0.2946 0.2697 0.2267 0.1911 0.1615 11 2232 12 13 0.6246 0.5568 0.4970 0.6006 0.5303 0.4688 14 15 0.5553 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.1954 0.1619 0.1346 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1685 0.1372 0.1122 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1452 0.1163 0.0935 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1252 0.0985 0.0779 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1079 0.0835 0.0649 62228 16 17 18 19 20 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.1883 0.1631 0.1415 0.1229 0.0930 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.0802 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0691 0.4746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0596 0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0514 0.2176 0.0708 0.0541 0.0600 0.0451 0.0508 0.0376 0.0431 0.0313 0.0365 0.0261 PV= $1 (1+i)" APPENDIX 9.2 Present value of an annuity of $1 per period. Periods 4% 1 0.9615 2 1.8861 3 2.7751 4 3.6299 5 4.4518 5% 6% 7% 8% 9% 0.9524 0.9434 0.9346 0.9259 0.9174 1.8594 1.8334 1.8080 1.7833 1.7591 2.7232 2.6730 2.6243 2.5771 2.5313 3.5460 3.4651 3.3872 3.3121 3.2397 4.3295 4.2124 4.1002 3.9927 3.8897 10% 11% 12% 0.9091 0.9009 0.8929 1.7355 1.7125 1.6901 2.4868 2.4437 2.4018 3.1698 3.1024 3.0373 3.7907 3.6959 3.6048 67899 18% 13% 14% 16% 20% 0.8850 0.8772 0.8621 0.8475 0.8333 1.6681 1.6467 1.6052 1.5656 1.5278 2.3612 2.3216 2.2459 2.1743 2.1065 2.9745 2.9137 2.7982 2.6901 2.5887 3.5172 3.4331 3.2743 3.1272 2.9906 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.6847 3.4976 3.3255 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.0386 3.8115 3.6046 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.3436 4.0776 3.8372 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.6065 4.3030 4.0310 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 4.8332 4.4941 4.1925 10 #2232 11 12 13 14 15 8.7605 8.3064 7.8869 9.3851 8.8633 8.3838 9.9856 9.3936 8.8527 10.5631 9.8986 9.2950 11.1184 10.3797 9.7122 7.4987 7.1390 6.8052 6.4951 7.9427 7.5361 7.1607 6.8137 8.3577 7.9038 7.4869 7.1034 8.7455 8.2442 7.7862 7.3667 9.1079 8.5595 8.0607 7.6061 6.2065 5.9377 5.6869 5.4527 5.0286 4.6560 4.3271 6.4924 6.1944 5.9176 5.6603 5.1971 4.7932 4.4392 6.7499 6.4235 6.1218 5.8424 5.3423 4.9095 4.5327 6.9819 6.6282 6.3025 6.0021 5.4675 5.0081 4.6106 7.1909 6.8109 6.4624 6.1422 5.5755 5.0916 4.6755 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.6685 5.1624 4.7296 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 5.7487 5.2223 4.7746 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 5.8178 5.2732 4.8122 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 7.3658 6.9380 6.5504 5.8775 5.3162 4.8435 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 5.9288 5.3527 4.8696 16 17 18 19 13.1339 20 1 $1- PVA= (1+1)" i