Question: Amaro Hospital a not for profit institution not subject to income taxes

Amaro Hospital, a not-for-profit institution not subject to income taxes, is considering the purchase of new equipment costing $20,000 to achieve cash savings of $5,000 per year in operating costs. The estimated useful life is 10 years, with no terminal value. Amaro’s minimum expected return is 14%.

A. What is the net present value of this investment?
B. What is the internal rate of return?
C. What is the accrual accounting rate of return based on the initial investment?
D. What is the payback period?

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  • CreatedJanuary 26, 2015
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