Net Present Value and Competing Projects

For discount factors use Exhibit 12B.1 and Exhibit 12B.2.

Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows:

Year	Puro Equipment	Briggs Equipment
1	$320,000	$120,000
2	280,000	120,000
3	240,000	320,000
4	160,000	400,000
5	120,000	440,000

Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value.

Required:

Download Excel spreadsheet

Round present value calculations and your final answers to the nearest dollar.

1. Assuming a discount rate of 8%, compute the net present value of each piece of equipment.

Line Item Description	Amount
Puro equipment:	$ 366,146 is wrong
Briggs equipment:	$ 501,485 is wrong

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