**Educational Text Transcription**---5. Evaluate the Internal Rate of Return (IRR) for the zero net present worth using Microsoft Excel Spreadsheet.6. Medtronic management have set a MARR of 15% for any of their projects; will you advise Medtronic to embark on this project knowing the net positive cash flow received from Memorial Hermann is reinvested at 14%. The loan Medtronic obtained from Bank of America Merrill Lynch for the production of the medical devices is borrowed at a rate of 7%.---*Note: There are no graphs or diagrams in the provided image.* Medtronic Inc. has an opportunity to supply medical devices to Memorial Hermann, a private hospital in the United States. Memorial Hermann will pay $4 million upfront, i.e., when the contract is signed, and $3 million for the first year, $1.5 million for the second year, and $7.5 million for the third year. Medtronic had obtained a loan from Bank of America Merrill Lynch (an investment bank) prior to the initial payment from Hermann and invested $2 million from it at the beginning of the project. Subsequently, Medtronic will spend $3.5 million, $10 million, $1.5 million, $4 million, and $3 million as running costs for the first, second, third, fourth, and fifth year respectively. Memorial Hermann will take delivery of the medical devices during year 4, and agrees to pay $4.25 million at the end of that year and the $4.5 million balance at the end of year 5. The outcome of the rate of return on this investment as compared with the minimum attractive rate of return (MARR) will determine if Medtronic will continue to sustain their current staff strength or they will cede to the option of downsizing after the completion of the 5-year deal. Medtronic management requests her project management team to conduct an economic analysis on the proposed venture (project) so that they can be better informed on policy formulation in readiness for any exigency that may result from the project. These exigencies include but are not limited to staff downsizing, staff retainment, salary freezing, and salary cuts or closing down some of their plants since they are a multinational company. The project management team is planning to approach the task as follows:

5. Evaluate the Internal Rate of Return (IRR) for the zero net present worth using Microsoft Excel Spreadsheet. 6. Medtronic management have set a MARR of 15% for any of their project; will you advise Medtronic to embark on this project knowing the net positive cash flow received from Memorial Hermann is reinvested at 14%. The loan Medtronic obtained from Bank of America Merrill Lynch for the production of the medical devices is borrowed at a rate of 7 %.

5. Evaluate the Internal Rate of Return (IRR) for the zero net present worth using Microsoft Excel Spreadsheet. 6. Medtronic management have set a MARR of 15% for any of their project; will you advise Medtronic to embark on this project knowing the net positive cash flow received from Memorial Hermann is reinvested at 14%. The loan Medtronic obtained from Bank of America Merrill Lynch for the production of the medical devices is borrowed at a rate of 7 %.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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