Present value | ||||||||||||
Year | Option A | Option B | Present value factor @6% | Option A | Option B | |||||||
0 | -$171,000 | -$269,000 | 1 | -$171,000 | -$269,000 | |||||||
1 | $40,900 | (70500-29600) | $54,500 | (81500-27000) | 0.9434 | $38,585 | $51,415 | |||||
2 | $40,900 | (70500-29600) | $54,500 | (81500-27000) | 0.89 | $36,401 | $48,505 | |||||
3 | $40,900 | (70500-29600) | $54,500 | (81500-27000) | 0.83962 | $34,340 | $45,759 | |||||
4 | -$8,000 | (70500-29600-48900) | $54,500 | (81500-27000) | 0.79209 | -$6,337 | $43,169 | |||||
5 | $40,900 | (70500-29600) | $54,500 | (81500-27000) | 0.74726 | $30,563 | $40,726 | |||||
6 | $40,900 | (70500-29600) | $54,500 | (81500-27000) | 0.70496 | $28,833 | $38,420 | |||||
7 | $40,900 | (70500-29600) | $61,600 | (81500-27000+7100) | 0.66506 | $27,201 | $40,968 | |||||
IRR | 9% | 10% | Present value | $189,587 | $308,962 | |||||||
Net Present value | $18,587 | $39,962 | ||||||||||
Net present value | Profitability index | IRR | ||||||||||
Option A | $18,587 | 1.11 | 9.00% | |||||||||
Option B | $39,962 | 1.15 | 10.00% | |||||||||
Option B should be accepted. |
Brooks Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would...
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....
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....
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....
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....
Problem 25-03A 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...
Problem 25-03A 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...
Problem 25-03A 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...
Problem 25-03A 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...
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Problem 25-03A a-b (Video) (Part Level Submission) Bonita 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...