Question: apitol Health Plans, Inc. is evaluating two different methods for providing home health services to its members . Both methods involve contracting out for services,

apitol Health Plans, Inc. is evaluating two different methods for providing home health services to itsmembers. Both methods involve contracting out for services, and the health outcomes and revenues arenot affected by the method chosen. The cost of capital is 9%.The incremental cash flows for the decision are all outflows. Here are the projected flows:
YearMethod AMethod B0-$300,000-$120,0001-$66,000-$96,0002-$66,000-$96,0003-$66,000-$96,0004-$66,000-$96,0005-$66,000-$96,000
What is the IRR for Method A?
What is the IRR for Method B?
Note: Think about this one carefully. Format is x.xx% or xx.xx% if positive; -x.xx% or -xx.xx% if negative. Enter null results as NA.
What is the NPV for Method A?
What is the NPV for Method B?
Note: Enter positive results as $xxx,xxx. Enter negative results as ($xxx,xxx)
Holding any qualitative factors aside, which method should be chosen based on this analysis?
Note: Enter answer as A or B

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!