Cullumber 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%. Option A Option B Initial cost $170,000 $293,000 Annual cash inflows $70.200 $83,000 Annual cash outflows $30,700 $25,600 Cost to rebuild (end of year 4) $49,000 $0 Salvage value $0 $7,800 Estimated useful life 7 years 7 years Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (Hint: To solve for internal ate of return, experiment with alternative discount rates to arrive at a net present value of zero.) (If the net present value is egative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answers for present value and IRR to O ecimal places, eg. 125 and round profitability index to 2 decimal places, eg. 12.50. For calculation purposes, use 5 decimal places as isplayed in the factor table provided.) Net Present Value Option A $ Option B $ Profitability Index Internal Rate of Return % %

A company's cash flow is the movement of its cash inflows and cash outflows. A cash flow statement is prepared to determine changes in an organization's cash position. A cash flow statement shows how much money was generated and spent on the business dur…