ALLULATUR MESSAGE HY INSTRUCTOR STANDARD VIEW PRINTER VERSION BACK NEXT Sheffield 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%. Initial cost Annual cash inflows Annual cash outflows Cost to rebuild (end of year 4) Salvage value Estimated useful life Option A $167,000 $71,700 $31,500 $50,200 $0 7 years Option B $271,000 $80,500 $25,800 $0 $8,300 7 years Click here to view PV table. 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 eg (45). Round answers for present value and IRR to o decimal places, e.g. 125 and round profitability index to 2 decimal places, e.g. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal Rate of Return Net Present Value Profitability Index s Option A Option B Which option should be accepted? should be accepted. Click if you would like to Show Work for this question: Open Show Work By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Question Attempts: 0 of 2 used