Evergreen Regional Hospital is considering investing $120,000 in new radiology equipment to replace their existing outdated equipment, which is fully depreciated. Alternatively, they could contract with a local imaging center for these services. By purchasing the new equipment, the hospital estimates they will save $28,000 annually in operating costs. The equipment has an expected useful life of 5 years with no salvage value at the end. Evergreen uses a discount rate of 10% for capital budgeting decisions. What is the Profitability Index of investing in the radiology equipment?

Evergreen Regional Hospital is considering investing $120,000 in new radiology equipment to replace their existing outdated equipment, which is fully depreciated. Alternatively, they could contract with a local imaging center for these services. By purchasing the new equipment, the hospital estimates they will save $28,000 annually in operating costs. The equipment has an expected useful life of 5 years with no salvage value at the end. Evergreen uses a discount rate of 10% for capital budgeting decisions. What is the Profitability Index of investing in the radiology equipment?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 8P: Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley...

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Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.
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Please help me. Thankyou.
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