Robert Williams is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Robert uses a 12% discount rate.

		Option 1		Option 2
Equipment purchase and installation		$71,800		$82,390
Annual cash flow		$28,600		$30,870
Equipment overhaul in year 6		$4,690		-
Equipment overhaul in year 8		-		$5,970

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(a)

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Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, e.g. 1.2514 and the final answers to 0 decimal places, e.g. 59,991.)

	Option 1	Option 2
Net present value	$enter a dollar amount rounded to 0 decimal places	$enter a dollar amount rounded to 0 decimal places

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(b)

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Calculate the profitability index of the two opportunities. (Round answers to 2 decimal places, e.g. 15.25.)

	Option 1	Option 2
Profitability Index	enter profitability index rounded to 2 decimal places	enter profitability index rounded to 2 decimal places

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(c)

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Which option should Robert choose?

Robert should choose select an option Option 1Option 2.