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Calculate the net present value of the two opportunities

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Reference no: EM133097113

Question - Thomas Taylor is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Thomas uses a 12% discount rate.

 

Option 1

Option 2

Equipment purchase and installation

$72,000

$83,610

Annual cash flow

$29,000

$31,380

Equipment overhaul in year 6

$4,980

-

Equipment overhaul in year 8

-

$6,390

Required -

a) Calculate the net present value of the two opportunities.

b) Calculate the profitability index of the two opportunities.

Reference no: EM133097113

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