Question
Brooks Clinic is considering investing in a new heart monitoring equipment . It has two Options A which is a lower initial investment but would
Brooks Clinic is considering investing in a new heart monitoring equipment . It has two Options A which is a lower initial investment but would be a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding but maintain costs are higher. Since 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 cost of the company's capital is 6%
Info. Option A. Option B
Initial cost $183,000 $267,000
Annual Cash Inflow $72,800 $80,300
Annual Cash Outflow $29,200 $26,200
Cost To Rebuild. (end of yr 4). $51,800 $0
Salvage Value. 0. $7,000
Estimate useful life 7 yrs. 7 yrs.
I need to compute the net present value, profitability index, and internal rate of return for each option. *If net value if negative I need to put parenthesis around it and present value and internal rate are round to zero decals, profitability index is rounded 2 decimal places.
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