Solution A B Future Present a b c d Value Value Factor FVF A B FVF FVF

Solution A B Future Present a b c d Value Value Factor FVF

Present a b c d Value Value Factor FVF A B FVF FVF FVF Present Future Value Value

Solution A B Future Present a b c d Value Value

Factor FVF A B FVF FVF FVF Present Future Value Value

Solution A B Future Present a b c

Solution A B Future

Category: | General |

Words: | 1050 |

Amount: | $12 |

Writer: |

Paper instructions

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?1
A
B
Future
Present
Value
Value
Factor
a)
$24,000
FVF8,2
b)
$24,000
FVF8,4
c)
$24,000
FVF8,6
d)
$24,000
FVF8,8
2
A
B
Present
Future
Value
Value
Factor
a)
$120,000
b)
$120,000
c)
$120,000
d)
$120,000
3
Givens (in thousands)
IniTal investment
1800000
Annual revenues
1500000
Annual operaTng expenses before depreciaTon
1000000
Annual depreciaTon expense [a]
40000
Annual change in net working capital
30000
Salvage value
200000
Cost of capital
8%
±ax rate
[a] ($1,800,000 Purchase price - $200,000 Salvage value) / 5 years =
320000
Non-proFt analysis (in thousands)
Years
0
1
IniTal investment
($1,600,000)
Revenues
$1,500,000
OperaTng expenses before depreciaTon
[Given 3]
1,000,000
DepreciaTon expense
[Given 4]
40,000
OperaTng income
[B-C-D]
460,000
Add: depreciaTon expense
[Given 4]
40,000
Net operaTng cash ²ow
[E+³]
500,000
Change in net working capital
[Given 5]
30,000
±erminal values
Salvage value
[Given 6]
Recovery of net working capital
-[Sum H]
PVF
3,5
PVF
6,5
PVF
9,5
PVF
12,5

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