please post full answer ch12.4

III *** Question 4 of 9 1.67/4 E Ivanhoe 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 5% Option A Option B Initial cost $182.000 $283,000 Annual cash inflows $72,800 $81,700 Annual cash outflows $30,600 $26,500 Cost to rebuild (end of year 4) $51,300 50 Salvage value $0 $8.600 Estimated useful life 7 years 7 years Clochere to view the factor table 1.6/74 Your answer is partially correct. 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, 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 5 1996032 1.1096 8.00 % Option B S 11200 11502 eTextbook and Media || (a)