Project C - Replacement Generator

Plant Operations has indicated SUS Hospital is in need of replacement parts for the HVAC system. Although there are much newer and more efficient models, the Plant Operations Director is sure it will save the hospital quite a bit of money to buy replacement parts instead of a brand new system. The parts would cost $145,680 and they are expected to provide cost savings of $15,000 per year for 15 years.

1. Estimation of the project's cash flows

2. Assessment of risk

3. Estimation of the cost of capital

4. Determination of the project's profitability

5. Compute the internal rate of return (IRR) and the net present value (NPV) for each project.

6. Based strictly on the calculations, which projects should be accepted or rejected?

7. What type of non-financial data should be considered for each project?