9991 Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (Hint: To solve for internalrate of return, experiment with alternative discount rates to arrive at a net present value of zero.) (If the net present value isnegative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answers for present value and IRR to Odecimal places, e.g. 125 and round profitability index to 2 decimal places, e.g. 12.50. For calculation purposes, use 5 decimal places asdisplayed in the factor table provided.)Option A$Option B. $Net Present ValueSave for LaterUsing multiple attempts will impact your score.10% score reduction after attempt 1Profitability IndexInternal Rate of Return%%Attempts: 0 of 2 usedSubmit Answer Bramble Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lowercost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but itsmaintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at theend of its useful life. The following estimates were made of the cash flows. The company's cost of capital is 5%Initial costAnnual cash inflowsAnnual cash outflowsCost to rebuild (end of year 4)Salvage valueEstimated useful life iClick here to view PV table.Option A$166,000$70,600$31,700$49,600$07 yearsOption B$278,000$81,000$26,700$0$8,8007 years

The present value of cash inflows and outflows over a given period are compared using the net…

Bramble 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%. Initial cost Annual cash inflows Annual cash outflows Cost to rebuild (end of year 4) Salvage value Estimated useful life Click here to view PV table. Option A $166.000 $70,600 $31,700 $49,600 $0 7 years Option B $278,000 $81,000 $26,700 $0 $8,800 7 years

Bramble 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%. Initial cost Annual cash inflows Annual cash outflows Cost to rebuild (end of year 4) Salvage value Estimated useful life Click here to view PV table. Option A $166.000 $70,600 $31,700 $49,600 $0 7 years Option B $278,000 $81,000 $26,700 $0 $8,800 7 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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