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Oriole 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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Oriole 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 $277.000 Initial cost $186,000 Annual cash inflows $72,200 $82.700 $28,000 $26,800 Annual cash outflows Cost to rebuild (end of year 4) Salvage value $51.000 $0 50 $8.600 Estimated useful life 7 years 7 years 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.) of the net present values negative, use either a negative sign preceding the number es -45 or parentheses es (45). Round answers for present value and IRR DOO decimal ploces, es 125 and round profitability Index to 2 decimal places, ex 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 $

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