MRI Purchase Decision
Radiology group is considering the purchase of a new MRI.
Theyre evaluating two proposals for what is perceived to be comparable pieces of equipment, as follows:
GE Healthcare: Future expenses of $130,000 per year, with an initial capital investment of $2.5M.
Siemens: Future expenses of $180,000 per year, with an initial capital outlay of $2.25M.
Calculate net present cost to identify the preferred purchase assuming a 7.5% annual discount rate.
Details of the cash flows are as follow:
	Year	GE Healthcare	Siemens
Initial Outlay	0	($2,500,000)	($2,250,000)
Annual Outlay	1	($130,000)	($180,000)
	2	($130,000)	($180,000)
	3	($130,000)	($180,000)
	4	($130,000)	($180,000)
	5	($130,000)	($180,000)
	6	($130,000)	($180,000)
	Total	($3,280,000)	($3,330,000)
Annual Cost of Capital
Calculate using Excel formulas: Equipment A: PV of Annuity: PV of Initial Outlay: Total PV: Equipment B: PV of Annuity: PV of Initial Outlay: Total PV: