Spiro Hospital is investigating the possibility of investing in new dialysis equ

Question

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:

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:

1.  Assuming a discount rate of 10%, compute the net present value of each piece of equipment.

Puro equipment: $ Briggs equipment: $ 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:

Explanation / Answer

so its NPV should be greater than Briggs

435094 = -560000 + cash flow * PVIFA(10%,5)

cash flow = 262502

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