Initial investment of $100,000 in a new medical equipment. Interest Rate 10% (Borrowed money from a...
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Initial investment of $100,000 in a new medical equipment. Interest Rate 10% (Borrowed money from a bank). Item Investment Expected Cash Flow PV Factor (1+r) DCF or PV PV (Yr. 1 to 5) + Year 0 100,000 -100,000 Year 1 20,000 Year 2 30,000 Less Investment: NPV Year 3 30,000 $ Year 4 40,000 Year 5 50,000 1. Payback Period Exercise: MRI purchase . . . Initial investment = Annual net cash flow Payback period = Calculation: Answer: $500,000 = $250,000 Investment Amount Net Annual Cash Flow before Taxes 2. Average Rate of Return (ARR) Exercise: MRI Purchase Example . Average Rate of Return = Calculation: Average net income per year Average investment amount = ($510,000 +- $10,000)/2 = $250,000 Answer: = $150,000 Average Net Income Average Investment Amount Initial investment of $100,000 in a new medical equipment. Interest Rate 10% (Borrowed money from a bank). Item Investment Expected Cash Flow PV Factor (1+r) DCF or PV PV (Yr. 1 to 5) + Year 0 100,000 -100,000 Year 1 20,000 Year 2 30,000 Less Investment: NPV Year 3 30,000 $ Year 4 40,000 Year 5 50,000 1. Payback Period Exercise: MRI purchase . . . Initial investment = Annual net cash flow Payback period = Calculation: Answer: $500,000 = $250,000 Investment Amount Net Annual Cash Flow before Taxes 2. Average Rate of Return (ARR) Exercise: MRI Purchase Example . Average Rate of Return = Calculation: Average net income per year Average investment amount = ($510,000 +- $10,000)/2 = $250,000 Answer: = $150,000 Average Net Income Average Investment Amount
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Net Present Value NPV is a financial metric used to evaluate the profitability of an investment or p... View the full answer
Related Book For
Calculus For Business, Economics And The Social And Life Sciences
ISBN: 9780073532387
11th Brief Edition
Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price
Posted Date:
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