Please help me with question 21 from Chapter 7 of Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts and Applications, 5th Edition isbn 978-1-119-55384-7 August 2020 Jossey-Bass

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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 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 $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. 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? 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 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 $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. 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