View Policies Current Attempt in Progress Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option 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% Initial cost Annual cash inflows Annual cash outflows Cost to rebuild lend of year 4) Salvage value Estimated useful life Option A $186,000 $72,200 $28,000 $51,000 $0 7 years Option B $277.000 $82,700 $26,800 SO $8,600 7 years Click here to view PV table. (a) 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.) (if the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses es (45). Round answers for present value and IRR to o decimal places, eg. 125 and round profitability index to 2 decimal places. e.3. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net Present Value Profitability Index Internal Rate of Retur $ Option A Option B 5 eTextbook and Media Save for Later Attempts unlimited Submit Answer (6) The parts of this guestion must be completed in order. This part will be able when you complute the part above Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. ton, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He belleves that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information 1 Five used vans would cost a total of $74.235 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation. 2 Ten drivers would have to be employed at a total payroll expense of $48,100. 3 Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,100. Maintenance $3,400, Repairs $4.000 Insurance 53,700, and Advertising $2,400, Lon has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital. 5 Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trilo ticket 4 Click here to view PV table al Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to O decimal places, e.g. 125.1 $ Net income Net annual cash flows th Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, 1. 10.30.) Cath payback period years Annual rate of return ld Compute the net present value of the commuter service. (Round answer to decimal places, s. 125. If the net present value is negative ute either a negative in preceding the numbers 45 or parentheses (45), For calculation purposes, we decimal places es displayed in the factor tale provided presenta Textbook and Media Save for Later Attempted Ana