Frios Cheyenne 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 6%. Option A Option B Initial cost $186,000 $277.000 Annual cash inflows $72,200 $82,700 Annual cash outflows $28,000 $26,800 Cost to rebuild (end of year 4) $51,000 $0 Salvage value $0 $8.600 Estimated useful life 7 years 7 years Click here to view pitable, Table 1 Future Value of 1 (n) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% I 0 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1 1.04000 1.05000 1.06000 1.07000 1.08000 1.09000 1.10000 1.11000 1.12000 1.15000 1.08160 1.10250 1.12360 1.14490 1.16640 1.18810 1.21000 1.23210 1.25440 1.32250 2 3 4 1.12486 1.15763 1.19102 1.22504 1.25971 1.29503 1.33100 1.36763 1.40493 1.52088 1.16986 1.21551 1.26248 1.31080 1.36049 1.41158 1.46410 1.51807 1.57352 1.74901 1.21665 1.27628 1.33823 1.40255 1.46933 1.53862 1.61051 1.68506 1.76234 2.01136 5 6 1.26532 1.34010 1.41852 1.50073 1.58687 1.67710 1.77156 1.87041 1.97382 2.31306 7 1.31593 1.40710 1.50363 1.60578 1.71382 1.82804 1.94872 2.07616 2.21068 2.66002 8 9 1.36857 1.47746 1.59385 1.71819 1.85093 1.99256 2.14359 2.30454 2.47596 3.05902 1.42331 1.55133 1.68948 1.83846 1.99900 2.17189 2.35795 2.55803 2.77308 3.51788 1.48024 1.62889 1.79085 1.96715 2.15892 2.36736 2.59374 2.83942 3.10585 4.04556 1.53945 1.71034 1.89830 2.10485 2.33164 2.58043 2.85312 3.15176 3.47855 4.65239 10 11 12 1.60103 1.79586 2.01220 2.25219 2.51817 2.81267 3.13843 3.49845 3.89598 5.35025 12. 1.60103 1.79586 2.01220 2.25219 2.51817 2.81267 3.13843 3.49845 3.89598 5.35025 13 1.66507 1.88565 2.13293 2.40985 2.71962 3.06581 3.45227 3.88328 4.36349 6.15279 14 1.73168 1.97993 2.26090 2.57853 2.93719 3.34173 3.79750 4.31044 4.88711 7.07571 15 1.80094 2.07893 2.39656 2.75903 3.17217 3.64248 4.17725 4.78459 5.47357 8.13706 16 1.87298 2.18287 2.54035 2.95216 3.42594 3.97031 4.59497 5.31089 6.13039 9.35762 17 1.94790 229202 2.69277 3.15882 3.70002 4.32763 5.05447 5.89509 6.86604 10.76126 18 2.02582 2.40662 2.85434 3.37993 3.99602 4.71712 5.55992 6.54355 7.68997 12.37545 19 2.10685 2.52695 3.02560 3.61653 4.31570 5.14166 6.11591 7.26334 8.61276 14.23177 20 2.19112 2.65330 3.20714 3.86968 4.66096 5.60441 6.72750 8.06231 9.64629 16.36654 Table 2 Future Value of an Annuity of 1 (n) Payments 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 1.00000 1.00000 1.00000 1.0000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 2 2.04000 2.05000 2.06000 2.0700 2.08000 2.09000 2.10000 2.11000 2.12000 2.15000 3.12160 3.15250 3.18360 3.2149 3.24640 3.27810 3.31000 3.34210 3.37440 3.47250 4 4.24646 4.31013 4.37462 4.4399 4.50611 4.57313 4.64100 4.70973 4.77933 4.99338 3 3.12160 3,15250 3,18360 3,2149 3.24640 3.27810 331000 3.34210 337440 3.47250 4 4.24646 4.31013 437462 4.4399 4.50611 4 S7313 4.64100 4.70973 4.77933 4 99338 5 5.41632 5.52563 5.63 709 5.7507 5.86660 5.98471 6. 10510 6 22780 6.35285 6.74238 6 6.63298 6.80191 6.97532 7.1533 7.33592 7.52334 7.71561 791286 8.11519 8,75374 7 8 7.89829 8.14201 8.39384 8.6540 8.92280 9. 20044 9.48717 9.78327 10.08901 11.06680 9.21423 954911 9 89747 10 2598 1063663 11.02847 1143589 11 85943 12. 29969 13.72682 10.58280 11 02656 11.49132 11.978 12.48756 13.02104 13.57948 14.16397 14.77566 16. 78584 9 10 12.00611 12.57789 13, 18079 13.8164 1448656 15, 19293 15.93743 16.7201 17.54874 20 30372 11 13.48635 14. 20679 14 97164 15.7836 16 64549 17 56029 18 53117 19 56143 20 65458 24 34928 12 15.02581 1591713 16 86994 17.8885 18.97713 20. 14072 21.38428 22.71319 24.13313 29.00167 16.62684 17.71298 18.88214 20 1406 21.49530 22 95339 24.52271 26.21164 28.02911 34 35192 13 14 18. 29191 19 59863 21.01507 22 5505 24 21492 26.01919 2797498 30, 09492 32 39260 40 50471 20.02359 21.57856 23.27597 25.1290 27. 15211 29 36092 31.77248 34.40536 37 27972 47.58041 15 16 21.82453 23.65749 25,67253 27. 8881 30.32428 33.00340 35 94973 39, 18995 42.75328 55.71747 17 23.69751 25.84037 28.21288 30.8402 33.75023 36.97351 40.54470 44.50084 48.88367 65.07509 18 25.64541 28. 13238 30.90565 33.9990 37.45024 41.30134 45.59917 50.39593 55.74972 75.83636 19 27.67123 30.53900 33.75999 37.3790 41.44626 46.01846 51.15909 56 93949 63.43968 88 21181 20 29.77808 33 06595 36.78559 40. 9955 45,76196 5116012 57.27500 64,20283 72,05244 102 44358 Table 3 Present Value of 1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 96154 95238 94340 93458 92593 91743 90909 90090 89286 86957 I 2 92456 90703 89000 87344 85734 84168 82645 81162 79719 75614 3 88900 86384 83962 81630 .79383.77218 .75132 .73119.71178 65752 4 85480.82270 79209 76290 73503 70843 68301 65873 63552 57175 5 82193 .78353 .74726 71299 68058 64993 62092 5934556743 49718 6 79031 74622 70496 66634 63017 59627 5644753464 50663 43233 7 .75992 71068 66506 62275 58349 54703 51316 48166 45235 37594 8 73069 .67684 .62741 58201 54027 50187 46651 43393 40388 32690 9 10 11 12 70259 64461 59190 54393 50025 46043 42410 3909236061 28426 67556 61391 55839 50835 46319 4224138554 35218 32197 24719 64958 58468 52679 47509 42888 38753 35049.31728 28748 21494 .62460 55684 49697 4440139711 35554 31863 28584 25668 18691 6005753032 46884 41496 36770 32618 28966 25751 22917 16253 5774850507 4423038782 34016 2992526333 23199 20462 14133 13 14 14 S7748 S0507 44230 38782 34046 29925 26333 23199 20462 14133 15 55526 48102 4172736245 31524 27454 23939 20900 18270 12289 16 53391 45811 39365 33873 29189 25187 21763 18829 16312 10687 17 51337 43630 37136 31657 27027 23107 19785 16963 14564 09293 18 49363 41552 35034 29586 25025 21199 1798615282 13004 08081 19 47464 39573 33051 27615 23171 19449 16351 13768 11611 .07027 20 45639 37689 31180 25842 21455 17843 14864 12403 10367 06110 Table 4 Present Value of an Annuity of 1 (n) Payments 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 2 3 96154 95238 94340 93458 92593 91743 90909 90090 .89286 86957 1.88609 1.85941 1.83339 1.80802 1.78326 1.75911 1.73554 1.71252 1.69005 1.62571 2.77509 2.72325 2.67301 2.62432 2.57710 2.53130 2.48685 2.44371 2.40183 2.28323 3.62990 3.54595 3.46511 3.38721 3.31213 3.23972 3.16986 3.10245 3.03735 2.85498 4.45182 4.32948 4.21236 4.10020 3.99271 3.88965 3.79079 3.69590 3.60478 3.35216 5.24214 5.07569 4.91732 4.76654 4.62288 4.48592 4.35526 4.23054 4.11141 3.78448 4 S 6 5 4.45182 4.32948 4.21236 4.10020 3.99271 3.88965 3.79079 3.69590 3.60478 335216 6 5.24214 5.07569 4.91732 4.76654 4.62288 4.48592 4.35526 4.23054 4.11141 3.78448 7 6.00205 5.78637 5.58238 5.38929 5.20637 5.03295 4.86842 4.71220 4.56376 4.16042 8 6.73274 6.46321 6.20979 5.97130 5.74664 5.53482 5.33493 5.14612 4.96764 4.48732 9 7.43533 7.10782 6.80169 6.51523 6.24689 5.99525 5.75902 5.53705 5.32825 4.77158 8.11090 7.72173 7.36009 7.02358 6.71008 6.41766 6.14457 5.88923 5.65022 5.01877 10 11 8.76048 8.30641 7.88687 7.49867 7.13896 6.80519 6.49506 6.20652 5.93770 5.23371 12 9.38507 8.86325 8.38384 7.94269 7.53608 7.16073 6.81369 6.49236 6.19437 5.42062 13 9.98565 9.39357 8.85268 8.35765 7.90378 7.48690 7.10336 6.74987 6.42355 5.58315 14 10.56312 9.89864 9.29498 8.74547 8.24424 7.78615 7.36669 6.98187 6.62817 5.72448 15 11.11839 10.37966 9.71225 9.10791 8.55948 8.06069 7.60608 7.19087 6.81086 5.84737 16 17 18 11.65230 10.83777 10.105909.44665 8.85137 8.31256 7.82371 7.37916 6.97399 5.95424 12.16567 11.27407 10.47726 9.76322 9.12164 8.54363 8.02155 7.54879 7.11963 6.04716 12.65930 11.68959 10.82760 10.05909 9.37189 8.75563 8.20141 7.70162 7.24967 6.12797 13.13394 12.08532 11.15812 10.33560 9.60360 8.95012 8.36492 7.83929 7.36578 6.19823 13 59033 12.46221 11.46992 10.39401 9.81815 9.12855 8.51356 7.96333 7.46944 6.25933 19 20 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.) (if the net present value is negative, use either a negative ston preceding the number e.o. -45 or parentheses e.g. (45). Round answers for present value and IRR to 0 decimal places, e.g. 125 and round profitability index to 2 decimal places, c.0. 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 A $ Option B $ 90 Which option should be accepted? should be accepted. Click if you would like to Show Work for this question: Open Show Work