Question: please help! please help! Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost

please help! please help!  please help! please help! Brooks Clinic is considering investing in new
heart-monitoring equipment. It has two options. Option A would have an initial

Brooks 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 7%. Initial cost Annual cash inflows Annual cash outflows Cost to rebuild end of year 4) Salvage value Estimated useful life Option A $155,000 $70,700 $32.000 $48,300 $0 7 years Option B $262.000 $80,400 $25,700 $0 $8.100 7 years ) * Your answer is incorrect. 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 decimal places, eg. 125 and round profitability index to 2 decimal places, eg. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net Present Value Profitability Index Internal Rate of Return Option A $ 53565 1.35 16.01 %% Option B $ 5044 1.250 20.4 %6

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!