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Ivanhoe 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

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Ivanhoe 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 3 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%. Option A Option B Initial cost $182,000 $283,000 Annual cash inflows $72,800 $81.700 $30,600 $26,500 Annual cash outflows Cost to rebuild (end of year 4) Salvage value $51,300 $0 $0 $8.600 Estimated useful life 7 years 7 years Click here to view the factor table, (a) Compute the (1) net present value. (2) prontability 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 not present value of zero) fthe net present value is negative, use either a negative sign preceding the number es -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, eg, 12.50. For calculation purposes, use 5 decimal places as led in the fortrinlewd

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