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table {mso-displayed-decimal-separator:"\."; mso-displayed-thousand-separator:"\,";} tr {mso-height-source:auto;} col {mso-width-source:auto;} td {padding-top:1px; padding-right:1px; padding-left:1px; mso-ignore:padding; color:black; font-size:11.0pt; font-weight:400; font-style:normal; text-decoration:none; font-family:Calibri, sans-serif; mso-font-charset:0; text-align:general; vertical-align:bottom; border:none; white-space:nowrap; mso-rotate:0;} .xl22 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; border-top:none; border-right:none; border-bottom:none; border-left:1.0pt solid windowtext;} .xl23 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0;} .xl24 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0;} .xl112 {color:windowtext; font-size:10.0pt; font-weight:700; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:1.0pt solid windowtext; border-right:none; border-bottom:none; border-left:1.0pt solid windowtext;} .xl113 {color:windowtext; font-size:10.0pt; font-weight:700; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:1.0pt solid windowtext; border-right:none; border-bottom:none; border-left:none;} .xl114 {color:windowtext; font-size:10.0pt; font-weight:700; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:1.0pt solid windowtext; border-right:1.0pt solid windowtext; border-bottom:none; border-left:none;} .xl115 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:none; border-bottom:none; border-left:1.0pt solid windowtext;} .xl116 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center;} .xl117 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:1.0pt solid windowtext; border-bottom:none; border-left:none;} .xl118 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:none; border-bottom:1.0pt solid windowtext; border-left:1.0pt solid windowtext;} .xl119 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:none; border-bottom:1.0pt solid windowtext; border-left:none;} .xl120 {color:windowtext; font-size:10.0pt; font-family:Arial, sans-serif; mso-font-charset:0; text-align:center; border-top:none; border-right:1.0pt solid windowtext; border-bottom:1.0pt solid windowtext; border-left:none;}
| Parallon Business Solutions, a division of HCA that provides revenue cycle functions, is evaluating two different | |||||||||||
| computer systems for handling provider claims. There are no incremental revenues attached to the projects, | |||||||||||
| so the decision will be made on the basis of the present value of costs. Parallon's corporate cost of capital is 10 percent. | |||||||||||
| Here are the net cash flow estimates in thousands of dollars: | |||||||||||
| Year | System X | System Y | |||||||||
| 0 | -$1,300 | -$1,100 | |||||||||
| 1 | $825 | $750 | |||||||||
| 2 | $825 | $750 | |||||||||
| 3 | $825 | $750 | |||||||||
| a. Assume initially that the systems both have average risk. Which one should be chosen? |
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