Compute the minimum number of patient visits for each year so that Net Present Value is positive.
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A proposal based on cost-benefit analysis has been made to retrofit an old hospital in a medium-sized town in a developing country. The basic data are provided below. Retrofit period: 1 year Discount rate: 4% Costs: • Retrofit • Budget: Preliminaries Roof Windows Doors Useful life of facility: 10 years after retrofit Corporate tax: Exempted Mechanical, Electrical, and Plumbing Interior furnishings Wall, floor & ceiling finishes External works Interest during retrofit Fees and permits Organization overhead, etc Total retrofit cost Funding: Equity Debt (@5% interest over 10 years) $(000) 400 1,200 600 300 4.500 400 1,200 400 500 300 200 10,000 3,000 7,000 Benefits: A survey shows an average willingness to pay (WTP) of $10 per visit for improved facilities (e.g. beds, indoor air quality, etc) over the next 10 years. This amount is purely for improved facilities and excludes doctor fees, meals, etc. Energy savings of $10,000 per year over the next 10 years. Operations and maintenance: $400,000 for first year, and rising by 2% each year. Impact on surrounding environment: Minimal Water savings by harvesting rainwater, at $5,000 per year over the next 10 years. Transport savings by not having to travel to another town for medical treatment. The generalized travel cost is $20 per round trip, and it is estimated that 2,000 patients will make the trip cach year if the hospital is not upgraded. A proposal based on cost-benefit analysis has been made to retrofit an old hospital in a medium-sized town in a developing country. The basic data are provided below. Retrofit period: 1 year Discount rate: 4% Costs: • Retrofit • Budget: Preliminaries Roof Windows Doors Useful life of facility: 10 years after retrofit Corporate tax: Exempted Mechanical, Electrical, and Plumbing Interior furnishings Wall, floor & ceiling finishes External works Interest during retrofit Fees and permits Organization overhead, etc Total retrofit cost Funding: Equity Debt (@5% interest over 10 years) $(000) 400 1,200 600 300 4.500 400 1,200 400 500 300 200 10,000 3,000 7,000 Benefits: A survey shows an average willingness to pay (WTP) of $10 per visit for improved facilities (e.g. beds, indoor air quality, etc) over the next 10 years. This amount is purely for improved facilities and excludes doctor fees, meals, etc. Energy savings of $10,000 per year over the next 10 years. Operations and maintenance: $400,000 for first year, and rising by 2% each year. Impact on surrounding environment: Minimal Water savings by harvesting rainwater, at $5,000 per year over the next 10 years. Transport savings by not having to travel to another town for medical treatment. The generalized travel cost is $20 per round trip, and it is estimated that 2,000 patients will make the trip cach year if the hospital is not upgraded.
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Costs The total retrofit cost is 10000000 This includes various elements such as preliminaries roof windows doors mechanical electrical and plumbing w... View the full answer
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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