piro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year 1 2 3 4 5 Puro Equipment $320,000 280,000 240,000 160,000 120,000 Briggs Equipment $120,000 120,000 320,000 400,000 440,000 loth projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value. Required: tound present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment. Puro equipment: 326,404 X Briggs equipment: 435,072 X 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? ssume a 10% discount rate. 262,483 X per year
piro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year 1 2 3 4 5 Puro Equipment $320,000 280,000 240,000 160,000 120,000 Briggs Equipment $120,000 120,000 320,000 400,000 440,000 loth projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value. Required: tound present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment. Puro equipment: 326,404 X Briggs equipment: 435,072 X 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? ssume a 10% discount rate. 262,483 X per year
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows:
Year
1
2
3
4
5
Puro Equipment
$320,000
280,000
240,000
Puro equipment:
160,000
120,000
Briggs equipment:
Briggs Equipment
Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value.
326,404 X
$120,000
120,000
320,000
Required:
Round present value calculations and your final answers to the nearest dollar.
1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment.
$ 435,072 X
400,000
440,000
2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two?
Assume a 10% discount rate.
$ 262,483 X per year
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