Compute the NPV (at 10 percent cost of capital) and IRR to determine the financial feasibility of this project if this were a tax-paying entity with a tax rate of 30 percent.
MHA Medical Center is starting a new lab test center on its third floor. The expected patient volume demands will generate $500,000 per year in revenues for the next five years. The new center will incur operating expenses, excluding
Use the following tables. * LOOK at Image
| Givens: | Years | 0 | 1 | 2 | 3 | 4 | 5 | ||||||||
| Initial investment | $0 | $0 | |||||||||||||
| Net revenue | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Operating expenses | |||||||||||||||
| Depreciation expense | |||||||||||||||
| Salvage value at the end of project year | |||||||||||||||
| Cost of capital | |||||||||||||||
| Tax rate | |||||||||||||||
| Analysis | Years | 0 | 1 | 2 | 3 | 4 | 5 | ||||||||
| Initial investment | $0 | ||||||||||||||
| Net revenue | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Operating expense | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Depreciation expense | $0 | $0 | |||||||||||||
| Earnings before taxes | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Tax expense | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Earnings after taxes | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Add Depreciation expense | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Net operating cash flows | $0 | $0 | $0 | $0 | $0 | ||||||||||
| Salvage value | $ - | ||||||||||||||
| Project cash flows | $0 | $0 | $0 | $0 | $0 | $0 | |||||||||
| Cost of capital | 0% | 0% | 0% | 0% | 0% | ||||||||||
| Annual PV of cash flows | |||||||||||||||
| Sum of PV of cash flows | |||||||||||||||
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