00,000 21. Calexico Hospital plans to invest in a new MRI. The cost of the MRI...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
00,000 21. Calexico Hospital plans to invest in a new MRI. The cost of the MRI is $3,000,000. The machine. has an economic life of five years, and it will be depreciated over a five-year life to a $500,000 Len salvage value. Additional revenues attributed to the new machine will amount to $3,000,000 per year for five years. Additional operating costs, excluding depreciation expense, will amount to bhavillion $2,000,000 per year for five years. Over the life of the machine, net working capital will increase by $40,000 per year for five years. 30,000 * Net working captital - 40,000.- * Additional Rev3.000.cod for sys Salvage value- 500,000.- Cost-2,000,000 for sy net present value REVIEW QUESTIONS AND PROBLEMS 333 a. Assuming that the hospital is a non-taxpaying entity, what is the project's NPV at a discount rate of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? b. Assuming that the hospital is a taxpaying entity and its tax rate is 30 percent, what is the project's NPV at a cost of capital of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? (Hint: see Appendices C, D, and E.) itor decided 00,000 21. Calexico Hospital plans to invest in a new MRI. The cost of the MRI is $3,000,000. The machine. has an economic life of five years, and it will be depreciated over a five-year life to a $500,000 Len salvage value. Additional revenues attributed to the new machine will amount to $3,000,000 per year for five years. Additional operating costs, excluding depreciation expense, will amount to bhavillion $2,000,000 per year for five years. Over the life of the machine, net working capital will increase by $40,000 per year for five years. 30,000 * Net working captital - 40,000.- * Additional Rev3.000.cod for sys Salvage value- 500,000.- Cost-2,000,000 for sy net present value REVIEW QUESTIONS AND PROBLEMS 333 a. Assuming that the hospital is a non-taxpaying entity, what is the project's NPV at a discount rate of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? b. Assuming that the hospital is a taxpaying entity and its tax rate is 30 percent, what is the project's NPV at a cost of capital of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? (Hint: see Appendices C, D, and E.) itor decided
Expert Answer:
Answer rating: 100% (QA)
To calculate the net present value NPV and internal rate of return IRR of the project we need to analyze the cash flows associated with the investment ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
Students also viewed these finance questions
-
BACKGROUND You are an information analyst working for NEE. The company president has asked you to prepare a Quantitative analysis of financial, sales, and operations data to help determine which...
-
Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting...
-
1. As friends of Anna you have been asked to assist her in the preparation of a recommendation. You are to prepare the following: 2. Write an executive summary to the CEO and the board supported by...
-
An undamped mass spring system is released from rest from an initial displacement of x = 0.24 m and starts to oscillate. You see that the mass reaches its largest positive displacement for the first...
-
Recording Journal Entries Blaine Air Transport Service, Inc., has been in operation for three years. The following transactions occurred in February: February 1 Paid $275 for rent of hangar space in...
-
If the compact disc is spinning at a constant angular rate = 360 rev/min, determine the magnitudes of the accelerations of points A and B at the instant shown. A 22 mm- 60 mm B Problem 2/98
-
Machine learning and deep learning are both used today to create AI applications that learn from experience. What is the fundamental difference between the ways each of these technologies learn?
-
During the month of March, Olinger Companys employees earned wages of $64,000. Withholdings related to these wages were $4,896 for Social Security (FICA), $7,500 for federal income tax, $3,100 for...
-
A communications audit is often undertaken in businesses to better understand whether communication needs improvement. Explain what a communications audit involves and who might be considered key and...
-
In State v. Dawley, 201 Ariz. 285 (2001) the supreme court of Arizona gave the instruction, "actual physical control" of the vehicle if, based on the totality of the circumstances shown by the...
-
The six faces of a cube are painted violet, blue, red, green, yellow, and orange. If the cube is rolled 4 times, what is the probability that the green face appears exactly 3 times? (A) 3/24 (B)...
-
8) Explain in your own words the following code in Figure 3. (HR SCEHMA). 117 DECLARE 118 deptno NUMBER := 90; 119 CURSOR emp_cursor IS 120 121 122 123 BEGIN 124 FOR emp_record IN emp_cursor 125 126...
-
Elucidate the concept of the reader-writer problem and propose potential solutions to mitigate its challenges.
-
Could you elaborate on the architectural differences between OLTP (Online Transaction Processing) and OLAP (Online Analytical Processing) database systems, including their respective design...
-
Evaluate the following limits. Show all your work and justify your results. a) lim x118 b) lim x 3x e 200x+144x c)_lim_2(4x +1)(3 5x) x118 d) lim 4x4 +9x2x t(1 + 4t) t 2t +5 - 1 e) lim 4x(7x + x)...
-
(a) Prove, or give a counterexample to disprove: (i) For all x R: (ii) For all x EZ: |[x] = [x] 42x7- - X (iii) For all x, y, z Z, with z > 1 and zy: (x div y) = ((x % z) div (y % z)) (mod z)...
-
Provide a program in the target language of our compiler/interpreter that incorporates all elements of the language. It must include all of the following: Integer, Real and Boolean literals Every...
-
A new car sold for $31,000. If the vehicle loses 15% of its value each year, how much will it be worth after 10 years?
-
Section 10.4 describes four types of real option. For each of the following cases state which type of option is involved: a. Deutsche Metall postpones a major plant expansion. The expansion has a...
-
The $40 million lottery payment that you have just won actually pays $2 million per year for 20 years. The interest rate is 8%. a. If the first payment comes in I year, what is the present value of...
-
Some finance scholars cite well-documented behavioral biases to explain apparent cases of market inefficiency. Describe two of these biases.
-
A company with a price-earnings ratio of 14 has an earnings yield closest to: A. 7.14% B. 14.00% C. 92.86%
-
The role of the 8-K filing with the Securities and Exchange Commission is best described as to disclose: A. the annual report. B. executive compensation. C. holdings of beneficial owners.
-
Which of the following is not produced by a company to communicate its financial results? A. Schedule 13D. B. Annual report. C. 10-K statement.
Study smarter with the SolutionInn App