## Net Present Value (NPV) Calculations Using Each Model

March 10, 2018

**Net Present Value (NPV) Calculations Using Each Model**

Need the Net Present Value (NPV) calculations each model using the following techniques and ignoring income taxes: Dr. David Dunn, head of the radiology department at Grant Clinic Inc., is adding a new piece of diagnostic equipment to the department. Two similar models are offered by two different vendors, and both models would serve the needs of the clinic. Both also have an estimated useful life of five years, with no salvage value at the end of five years. The only difference between the two models is the cost and estimated annual labor savings, as shown below: Model A Model B Cost, including installation $120,000 $110,000 Estimated annual labor savings $40,000 $32,000 The straight-line method of depreciation is used on the books. Senior management of the clinic has established a target rate of return of 15% for all equipment with a useful life of over two years and a desired payback period of three years.

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