this is 14.7 that they ask about it in the problem

and this is the answer to the problem 14.7

Please I need help with this problem 15.3 with details about how you get the number to please ASaP

project's is the expected NPV on the basis of the NPV on the basis of the scenario analysis d. What is the roject's standard deviation of NPV stan at Heywood's managers judge the project to have er-than-average risk. Furthermore, the compan adjust the corporate cost of capital up or down by 3 percentage points to account for differential y's policy is to risk. Is the project financially attractive Consider the project contained in Problem 14.7 in Chapter 14. a. Perform a sensitivity analysis to see how NP'V is affected by a. Perform a sensitivity analysis to see how NIPV is by changes in the number of procedures per day, average collection amount, and salvage value. b. Conduct a scenario analysis. Suppose that the hospital's staff concluded that the three most uncertain variables were number of procedures per day, average collection amount, and the equipment's salvage value. Furthermore, the following data were developed: Number of Average Equipment $100,000 200,000 300,000 o Probability Procedures Collection Savage Value s 60 80 100 orst 10 15 20 0.25 0.50 0.25 Most likely est ance c. Finally, assume that California Health Center's average project has a coefficient of variation of NPV in the range of 1.0-2.0. (Hint: The coefficient of variation is defined as the standard deviation of NPV divided by the expected NPV.) The hospital adjusts for risk by adding or subtracting 3 percentage points to its 10 percent corporate cost of capital. After adjusting for differential risk, is the project still profitable? d. What type of risk was measured and accounted for in parts b and c? Should this be of concern to the hospital's managers? ers of United Medtronics are evaluating the following 4 The manag four projects for the coming budget period. The firm's corporate cost of capital is 14 percent. proposed new services Expected Net Cash Flow Year ($100) 70 50 20 The project's cost of capital is 10 percent. a. What is the project's payback period? b. What is the project's NPV? \c. What is the project's IRR? Its MIRR? 14.7 California Health Center, a for-profit hospital, is evaluating the purchase of new diagnostic equipment. The equipment, which coss $600,000, has an expected life of five years and an estimated preta salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year of the project's life. On average, each procedure is expected to generate $80 in collections, which is net of bad debt losses allowances, in its first year of use. Thus, net revenues for Year 1 arc estimated at 15 250 $80 = $300,000. and contractual Labor and maintenance costs are expected to be $100,000 during the first year of operation, while utilities will cost another $10,000 and cash overhead will increase by $5,000 in Year l cost for expendable supplies is expected to avg recia- dure during the first year. All costs and revenues, except deprecia tion, are expected to increase at a 5 percent in first year. . The S5 per proce- flation rate after the Chapter 14: The Basics of Capital Budgeting The equipment falls into the MACRS five-year class for tax tion and is subject to the following depreciation allowances: 557 Year Allowance 1 0.20 2 0.32 3 0.19 4 0.12 5 0.11 6 0.06 1.00 The hospital's tax rate is 40 percent, and its corporate cost of capi tal is 10 percent a. Estimate the project's net cash flows over its five-year estimated life. (Hint: Use the following format as a guide.) Year Equipment cost Net revenues Less: Labor/maintenance costs Utilities costs Incremental overhead Depreciation Operating income Taxes Net operating income Plus: Depreciation Plus: Equipment salvage value Net cash flow b. What are the project's NPV and IRR? (A 14.8 You have been ssume for now that the project has average risk.) asked by the president and CEO of Kidd nsed acquisition of a new project's is the expected NPV on the basis of the NPV on the basis of the scenario analysis d. What is the roject's standard deviation of NPV stan at Heywood's managers judge the project to have er-than-average risk. Furthermore, the compan adjust the corporate cost of capital up or down by 3 percentage points to account for differential y's policy is to risk. Is the project financially attractive Consider the project contained in Problem 14.7 in Chapter 14. a. Perform a sensitivity analysis to see how NP'V is affected by a. Perform a sensitivity analysis to see how NIPV is by changes in the number of procedures per day, average collection amount, and salvage value. b. Conduct a scenario analysis. Suppose that the hospital's staff concluded that the three most uncertain variables were number of procedures per day, average collection amount, and the equipment's salvage value. Furthermore, the following data were developed: Number of Average Equipment $100,000 200,000 300,000 o Probability Procedures Collection Savage Value s 60 80 100 orst 10 15 20 0.25 0.50 0.25 Most likely est ance c. Finally, assume that California Health Center's average project has a coefficient of variation of NPV in the range of 1.0-2.0. (Hint: The coefficient of variation is defined as the standard deviation of NPV divided by the expected NPV.) The hospital adjusts for risk by adding or subtracting 3 percentage points to its 10 percent corporate cost of capital. After adjusting for differential risk, is the project still profitable? d. What type of risk was measured and accounted for in parts b and c? Should this be of concern to the hospital's managers? ers of United Medtronics are evaluating the following 4 The manag four projects for the coming budget period. The firm's corporate cost of capital is 14 percent. proposed new services Expected Net Cash Flow Year ($100) 70 50 20 The project's cost of capital is 10 percent. a. What is the project's payback period? b. What is the project's NPV? \c. What is the project's IRR? Its MIRR? 14.7 California Health Center, a for-profit hospital, is evaluating the purchase of new diagnostic equipment. The equipment, which coss $600,000, has an expected life of five years and an estimated preta salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year of the project's life. On average, each procedure is expected to generate $80 in collections, which is net of bad debt losses allowances, in its first year of use. Thus, net revenues for Year 1 arc estimated at 15 250 $80 = $300,000. and contractual Labor and maintenance costs are expected to be $100,000 during the first year of operation, while utilities will cost another $10,000 and cash overhead will increase by $5,000 in Year l cost for expendable supplies is expected to avg recia- dure during the first year. All costs and revenues, except deprecia tion, are expected to increase at a 5 percent in first year. . The S5 per proce- flation rate after the Chapter 14: The Basics of Capital Budgeting The equipment falls into the MACRS five-year class for tax tion and is subject to the following depreciation allowances: 557 Year Allowance 1 0.20 2 0.32 3 0.19 4 0.12 5 0.11 6 0.06 1.00 The hospital's tax rate is 40 percent, and its corporate cost of capi tal is 10 percent a. Estimate the project's net cash flows over its five-year estimated life. (Hint: Use the following format as a guide.) Year Equipment cost Net revenues Less: Labor/maintenance costs Utilities costs Incremental overhead Depreciation Operating income Taxes Net operating income Plus: Depreciation Plus: Equipment salvage value Net cash flow b. What are the project's NPV and IRR? (A 14.8 You have been ssume for now that the project has average risk.) asked by the president and CEO of Kidd nsed acquisition of a new