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1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment. $289,530 X $ 374,453 X Puro equipment: Briggs equipment: than that of the Puro equipment, Briggs should be chosen. The data analytics types are predictive and prescriptive Since the NPV of the Briggs equipment is greater 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. $259,226 X per year

1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment. $289,530 X $ 374,453 X Puro equipment: Briggs equipment: than that of the Puro equipment, Briggs should be chosen. The data analytics types are predictive and prescriptive Since the NPV of the Briggs equipment is greater 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. $259,226 X per year

Essentials Of Investments
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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Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. 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 $320,000 280,000 240,000 160,000 120,000 Briggs Equipment $120,000 120,000 320,000 400,000 440,000 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. 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. Puro equipment: $289,530 X Briggs equipment: 374,453 X Since the NPV of the Briggs equipment is greater chosen. The data analytics types are predictive and prescriptive 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. 259,226 X per year than that the Puro equipment, Briggs should be
Transcribed Image Text:Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. 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 $320,000 280,000 240,000 160,000 120,000 Briggs Equipment $120,000 120,000 320,000 400,000 440,000 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. 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. Puro equipment: $289,530 X Briggs equipment: 374,453 X Since the NPV of the Briggs equipment is greater chosen. The data analytics types are predictive and prescriptive 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. 259,226 X per year than that the Puro equipment, Briggs should be
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