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American Public University Operations And Supply Chain Management Assignment Help - Carolina Clinic

Question - Carolina 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 companys cost of capital is
12%. Option A Option B Initial cost $160,000 $227,000 Annual cash inflows $75,000 $80,000 Annual
cash outflows $35,000 $30,000 Cost to rebuild (end of year 4) $60,000 $0 Salvage value $0 $12,000
Estimated useful life 8 years 8 ...Read More

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