In-Class Cash Flow Estimation Exercise
Information to Solve Case
1) Assume Bloomington Indiana Mellencamp Health System, a not-for profit hospital, is evaluating a new MRI.
2) Cost
Purchase price	$500,000
Shipping and Install	$80,000
3) Expected life	5 years
4) Salvage Value	$250,000
5) Utilization	6000 scans per year
6) Net Revenue	$150 per scan
7) Variable Cost	$75 per scan
8) Fixed cost	$150,000
9) Corporate cost of capital	12%
Calculate the operating cash flow
Year 1	Year 2	Year 3	Year 4
Revenue
Fixed Costs
Variable Costs
Depreciation
BT operating income
Taxes
AT operating income
Depreciation
Net op. CF
Assume inflation is 2%