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

		Option 1		Option 2
Equipment purchase and installation		$72,000		$83,610
Annual cash flow		$29,000		$31,380
Equipment overhaul in year 6		$4,980		-
Equipment overhaul in year 8		-		$6,390

(a)

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

(b)

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

(c)

Which option should Thomas choose?

Thomas should choose select an option Option 1 Option 2.