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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		Puro Equipment		Briggs Equipment
1		$320,000		$120,000
2		280,000		120,000
3		240,000		320,000
4		160,000		400,000
5		120,000		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.

Required:

Round present value calculations and your final answers to the nearest dollar.

1. Assuming a discount rate of 8%, compute the net present value of each piece of equipment.

Puro equipment:	$
Briggs equipment:	$

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 8% discount rate. $ per year

For discount factors use Exhibit 12B.1 Exhibit 12B.2. Spiro Hospital is investigating the possibility investing in new dialysis equipment. Two local manufacturers of this equipment are being considered sources of the equipment. After-tax cash inflows for the two competing projects are as follows Year Puro Equipment Briggs Equipment 1 $320,000 $120,000 280,000 120,000 3 240,000 320,000 160,000 400,000 4 5 120,000 440,000 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. Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 8%, compute the net present value f each piece of equipment. 366,146X Puro equipment 236.374 X Briggs equipment: 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 selected over the other two? Assume a 8 % discount rate. cash flow be for this equipment to 231,959 X per year Exhibit 12B. 1 Present Value of a Single Amount* 20% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 18% 25% 30% n/i 1 0.99010 0.980 39 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333 0.80000 0.76923 2 0.98030 0.96117 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.79719 0.76947 0.74316 0.71818 0.69444 0.64000 0.59172 3 0.97059 0.94232 0.91514 0.88900 0.86384 0.83962 0.81 630 0.79383 0.77218 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870 0.51200 0.45517 4 0.96098 0.92385 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.63552 0.59208 0.55229 0.51579 0.48225 0.40960 0.35013 5 0.95147 0.905 73 0.86261 0.82193 0.78353 0.74726 0.71299 0.68058 0.64993 0.62092 0.56743 0.51937 0.47611 0.43711 0.40188 0.32768 0.26933 6 0.94205 0.88797 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490 0.26214 0.20718 7 0.93272 0.870 56 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51 316 0.45235 0.39964 0.35383 0.31393 0.2 7908 0.20972 0.15937 8 0.92348 0.85349 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.40388 0.35056 0.30503 0.26604 0.23257 0.16777 0.12259 9 0.91434 0.83676 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 0.46043 0.42410 0.36061 0.30751 0.26295 0.22546 0.19381 0.13422 0.09430 10 0.90529 0.82035 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.32197 0.26974 0.22668 0.19106 0.161 51 0.10737 0.07254 11 0.89632 0.80426 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459 0.08590 0.05580 12 0.88745 0.78849 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 0.35553 0.31863 0.25668 0.20756 0.16846 0.13722 0.1 1 216 0.06872 0.04292 13 0.87866 0.77303 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.22917 0.18207 0.14523 0.11629 0.09346 0.05498 0.03302 14 0.86996 0.75788 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.20462 0.15971 0.12520 0.09855 0.07 789 0.04398 0.02540 15 0.86135 0.74301 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.18270 0.14010 0.10793 0.08352 0.06491 0.03518 0.01954 16 0.85282 0.72845 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 0.25187 0.21763 0.16312 0.12289 0.09304 0.07078 0.05409 0.02815 0.01503 17 0.84438 0.71416 0.60502 0.51337 0.43630 0.37136 0.31657 0.27027 0.23107 0.19784 0.14564 0.10780 0.08021 0.05998 0.04507 0.02252 0.01156 18 0.83602 0.70016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.21199 0.17986 0.13004 0.09456 0.06914 0.05083 0.03756 0.01801 0.00889 19 0.82774 0.68643 0.57029 0.47464 0.39573 0.33051 0.27651 0.231 71 0.19449 0.1 6351 0.11611 0.08295 0.05139 0.04308 0.03130 0.01441 0.00684 20 0.81954 0.67297 0.55368 0.45639 0.37689 0.31180 0.25842 0.21455 0.17843 0.1 4864 0.10367 0.07276 0.05139 0.03651 0.02608 0.01153 0.00526 21 0.81143 0.65978 0.53755 0.43883 0.35894 0.29416 0.24151 0.19866 0.16370 0.1351 3 0.09256 0.06383 0.04430 0.03094 0.02174 0.00922 0.00405 22 0.80340 0.64684 0.52189 0.42196 0.34185 0.27751 0.22571 0.18394 0.15018 0.12285 0.08264 0.05599 0.03819 0.02622 0.01811 0.00738 0.00311 23 0.79544 0.63416 0.50669 0.40573 0.32557 0.26180 0.21095 0.17032 0.13778 0.1 1 168 0.07379 0.04911 0.03292 0.02222 0.01509 0.00590 0.00239 24 0.78757 0.62172 0.49193 0.39012 0.31007 0.24698 0.19715 0.157 70 0.12640 0.1 01 53 0.06588 0.04308 0.02838 0.01883 0.01258 0.00472 0.00184 25 0.77977 0.60953 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 0.11597 0.09230 0.05882 0.037 79 0.02447 0.01596 0.01048 0.00378 0.001 42 26 0.77205 0.59758 0.46369 0.36069 0.28124 0.21981 0.17220 0.13520 0.10639 0.08391 0.05252 0.03315 0.02109 0.01352 0.00874 0.00302 0.00109 27 0.76440 0.58586 0.45019 0.34682 0.26785 0.20737 0.16093 0.12519 0.09761 0.07628 0.04689 0.02908 0.01818 0.01146 0.00728 0.00242 0.00084 28 0.75684 0.57437 0.43708 0.33348 0.25509 0.19563 0.15040 0.11591 0.08955 0.06934 0.04187 0.02551 0.01567 0.00971 0.00607 0.00193 0.00065 29 0.74934 0.56311 0.42435 0.32065 0.24295 0.18456 0.14056 0.10733 0.08215 0.06 304 0.03738 0.02237 0.01351 0.00823 0.00506 0.00155 0.00050 30 0.74192 0.55207 0.41199 0.30832 0.23138 0.17411 0.13137 0.09938 0.07537 0.05731 0.03338 0.01963 0.01165 0.00697 0.00421 0.00124 0.00038 P A/(1 Exhibit 12B.2 Present Value of an Annuity n/i 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 18% 20% 25% 30% .80000 0.76923 0.99010 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333 1.97040 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.7591 1 1.73554 1.69005 1.64666 1.60523 1.56564 1.52778 1.44000 1.36095 2.94099 2.88388 2.82861 2.77509 2.72325 2.67301 2.62 432 2.57710 2.53129 2.48685 2.40183 2.32163 2.24589 2.17427 2.10648 3.90197 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.23972 3.1 6987 3.03735 2.91371 2.79818 2.69006 2.58873 2.36160 2.1 6624 1.95200 1.81611 4 5 4.85343 4.71346 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 3.88965 3.79079 3.60478 3.43308 3.27429 3.12717 2.99061 2.68928 2.43557 5.79548 5.601 43 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.48592 4.35526 4.11141 3.88867 3.68474 3.49760 3.32551 2.95142 2.64275 6.72819 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 5.03295 4.86842 4.56376 4.28830 4.0 3857 3.81153 3.60459 3.16114 2.80211 6 7 7.65168 7.32548 7.01969 6.73274 6.46321 6.20979 5.97130 5.74664 5.53482 5.33493 4.96764 4.63886 4.34359 4.07757 3.83716 3.32891 2.92470 8 8.56602 8.16224 7.78611 7.43533 7.10782 6.80169 6.51523 6.24689 5.99525 5.75902 5.32825 4.94637 4.60654 4.30302 4.03097 3.46313 3.01900 9 9.47130 8.98259 8.53020 8.1 1 090 7.72173 7.36009 7.02358 6.71008 6.41766 6.14457 5.65022 5.21612 4.83323 4.49409 4.19247 3.57050 3.09154 10 11 10.36763 9.78685 9.25262 8.76048 8.30641 7.88687 7.49867 7.13896 6.80519 6.49506 5.93770 5.45273 5.02864 4.65601 4.32706 3.65640 3.14734 12 11.25508 10.57534 9.95400 9.38507 8.86325 8.38384 7.94269 7.53608 7.16073 6.81369 6.19437 5.66029 5.19711 4.79322 4.43922 3.72512 3.19026 13 12.13374 11.34837 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.48690 7.10336 6.42355 5.84236 5.34233 4.90951 4.53268 3.78010 3.22328 14 13.00370 12.10625 11.29607 10.56312 9.89864 9.29498 8.74547 8.24424 7.78615 7.36669 6.62817 6.00207 5.46753 5.00806 4.61057 3.82408 3.24867 15 13.86505 12.84926 11.93794 11.11839 10.37966 9.71225 9.10791 8.55948 8.06069 7.60608 6.81086 6.14217 5.57546 5.09158 4.67547 3.85926 3.26821 16 14.71787 13.57771 12.56110 11.65230 10.837 77 10.10590 9.44665 8.85137 8.31256 7.82371 6.97399 6.26506 5.668 50 5.16235 4.72956 3.88741 3.28324 17 15.56225 14.291 87 13.16612 12.16567 11.27407 10.47726 9.76322 9.12164 8.54363 8.021 55 7.11963 6.37286 5.74870 5.22233 4.77463 3.90993 3.29480 18 16.39827 14.99203 13.75351 12.65930 11.68959 10.82760 10.05909 9.371 89 8.75563 8. 20141 7.24967 6.46742 5.81785 5.27316 4.81219 3.92794 3.30369 19 17.22601 15.67846 14.32380 13.13394 12.08532 11.15812 10.33560 9.60360 8.95011 8.36492 7.36578 6.55037 5.87746 5.31624 4.84350 3.94235 3.31053 20 18.04555 16.35143 14.87747 13.59033 12.46221 11.46992 10.59401 9.81815 9.12855 8.51356 7.46944 6.62313 5.92884 5.35275 4.86958 3.95388 3.31579 21 18.85698 17.01 1 21 15.41502 14.02916 12.821 15 11.76408 10.83553 10.01680 9.29224 8.64869 7.56200 6.68696 5.9731 4 5.38368 4.89132 3.96311 3.31984 22 19.66038 17.65805 15.93692 14.45112 13.16300 12.041 58 11.06124 10.20074 9.44243 8.77154 7.64465 6.74294 6.01133 5.40990 4.90943 3.97049 3.32296 23 20.45582 18.29220 16.44361 14.85684 13.48857 12.30338 11.27219 10.37106 9.58021 8.88 322 7.71843 6.79206 6.04425 5.43212 4.92453 3.976 39 3.32535 24 21.24339 18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 10.52876 9.70661 8.98474 7.78432 6.83514 6.07263 5.45095 4.93710 3.98111 3.32719 25 22.02316 19.52346 17.41315 15.62208 14.09394 12.78336 11.65358 10.67478 9.82258 9.07704 7.84314 6.87293 6.09709 5.46691 4.94759 3.984893.32861 26 22.79520 20.12104 17.87684 15.98277 14.37519 13.00317 11.82578 10.80998 9.92897 9.16095 7.89566 6.90608 6.11818 5.48043 4.95632 3.98791 3.32970 27 23.55961 20.70690 18.32703 16.32959 14.64 30 3 13.21053 11.98671 10.93516 10.02658 9.23722 7.94255 6.93515 6.13636 5.49189 4.96360 3.99033 3.33054 28 24.31644 21.281 27 18.76411 16.66306 14.89813 13.40616 12.1 371 1 11.05108 10.1161 3 9.30657 7.98442 6.96066 6.15204 5.501 60 4.96967 3.99226 3.33118 29 25.06579 21.84438 19.18845 16.98371 15.14107 13.59072 12.27767 11.15841 10.19828 9.36961 8.02181 6.98304 6.16555 5.50983 4.97472 3.99381 3.33168 30 25.80771 22.39646 19.60044 17.29203 15.37245 13.76483 12.40904 11.25778 10.27365 9.42691 8.05518 7.00266 6.17720 5.51681 4.97894 3.99505 3.33206 P (1/)-1/(1 + Iy]

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