solution
solution.
| As a result of their recent CHNA report, Hospital ABC decides it needs to invest in | ||||||||
| opening a new Health Screening Dep’t. The current financial condition is a real | ||||||||
| concern to Administration and the Board of Directors. The Project must pay for itself | ||||||||
| within the 4 years. Using NPV and a Corp Cost of Cap at 8% does it? | ||||||||
| Year | # of Screens per Year | Net Revenue | Fixed Expenses | Variable Expenses | Total Expenses | Net Income | ||
| 1 | 2400 | $ 240,000 | $ 120,000 | $ 96,000 | $ 216,000 | |||
| 2 | 3600 | $ 369,000 | $ 135,000 | $ 149,040 | $ 284,040 | |||
| 3 | 4800 | $ 504,300 | $ 150,000 | $ 205,675 | $ 355,675 | |||
| 4 | 6000 | $ 646,134 | $ 165,000 | $ 266,099 | $ 431,099 | |||
| Total | 16800 | $ 1,759,434 | $ 570,000 | $ 716,814 | $ 1,286,814 | |||
| 8% | CCC Rate | |||||||
| Cash Flows | PV’s | |||||||
| 0 | $ (350,000) | $ (350,000) | ||||||
| 1 | $ – | $0 | ||||||
| 2 | $ – | $0 | ||||||
| 3 | $ – | $0 | Net Rev/Unit went up 2.5% yr. | |||||
| 4 | $ – | $0 | Variable Expenses/Unit went up 3.5%/yr | |||||
| NPV | ||||||||
| IRR | ||||||||
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