Question: Can you please help me set this up in excel and the formulas I would use to complete the information needed- Capitol Health Plans, Inc.,
Can you please help me set this up in excel and the formulas I would use to complete the information needed-
| Capitol Health Plans, Inc., is evaluating two different methods for providing home health services to its | |||||||||
| members. Both methods involve contracting out for services, and the health outcomes and revenues are | |||||||||
| not affected by the method chosen. Therefore, the incremental cash flows for the decision are all outflows. | |||||||||
| Here are the projected flows: | |||||||||
| Year | Method A | Method B | ||||||
| 0 | -$300,000 | -$120,000 | ||||||
| 1 | -$66,000 | -$96,000 | ||||||
| 2 | -$66,000 | -$96,000 | ||||||
| 3 | -$66,000 | -$96,000 | ||||||
| 4 | -$66,000 | -$96,000 | ||||||
| 5 | -$66,000 | -$96,000 |
| a. What is each alternative's IRR? | ||||||||
| b. If the cost of capital for both methods is 9 percent, which method should be chosen? Why? | ||||||||
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