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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

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.)

Net Present Value:

Option 1 =

Option 2 =

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

Profitability Index:

Option 1 =

Option 2 =

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