The radiology department at St. Joseph's Hospital, a not-for-profit, is considering purchasing a magnetic resonance imaging (MRI)

Question:

The radiology department at St. Joseph's Hospital, a not-for-profit, is considering purchasing a magnetic resonance imaging (MRI) machine. The cost to purchase and install an MRI is approximately $2,000,000. Assume St. Joseph's would like a minimum 6 percent return and that the economic life of the MRI is expected to be 10 years, with no . Assume that if the MRI is installed, the net cash flows are expected to increase by $400,000 per year. Use Exhibit 26-4 for present value factors.
Exhibit 26-4: Present Value of a $1 Receivable Each Period for n Periods

a. Find the NPV of the MRI.
b. Should the hospital acquire the MRI?
c. What nonfinancial considerations might be important to the MRI investment decision?

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