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1 A B Future Present a) b) c) d) Value Value Factor $24,000 $24,000 $24,000 $24,000 FVF8,2 A B 2 FVF8,4 FVF8,6 FVF8,8 Present Future Value Value
Here are the instructions. My question is after reviewing problems 4 and 5 with the spreadsheet and instructions, can you directly specifically where I am straying and what is the best way for me to tackle these problems?
Marshall Healthcare System, a not-for-profit hospital, is planning on opening an imaging center including MRI, x-ray, ultrasound, and CT. The new center will generate $3 million per year in revenues for 5 years. Expected operating expenses, excluding depreciation, would increase expenses by $1.2 million per year over the life of the project. The initial capital investment outlay for the project is $5 million, which will be depreciated on a straight line basis to a savage value. The salvage value in year 5 is $800,000. The cost of capital for this project is 12%.
Compute the NPV in the IRR to determine the financial feasibility of the project.
Penn Medical Center, a for-profit hospital, is considering the purchase of a new 64-slice CT scanner. The cost of the new scanner is $5 million and will be depreciated over 10 years on a straight line basis to $0 savage value. The tax rate is 40%. The financing options include either borrowing the full cost of the scanner or leasing a scanner. The lease option is a 5-year lease with equal before-tax lease payments of $950,000 per year. The borrowing alternative is a 5-year loan covering the entire cost of the scanner at an interest rate of 5%. The after-tax cost of debt is 3%. Should Penn Medical lease the equipment or borrow the money?
