Taos Clinic is considering investing in new heart-monitoring equipment
January 10th, 2018
Taos 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 8%..transtutors.com/Transtutors001/Images/Transtutors001_b03582e4-9b1e-4119-9936-5ca7caa14db5.PNG”>Instructions(a) Compute the(1) Net present value and(2) Internal rate of return for each option.(b) Which option should be accepted?
