Generic Hospital has decided to invest in an Intuitive Robot called the Da Vinci. It is a robotic surgery device that is less invasive than standard surgeries and consequently allows shorter healing times and shorter length of stay in a hospital. The following are the terms of a lease for the DaVinci Robot: Fair Market Value Down Payment Lease Term (years) Interest Rate 1,922,633 250,000 5 4% A) What are the yearly payments associated with the lease of the robot? As part of the financial planning process, we have determined that the robot will last 5 years and we will be able to sell it to a foreign country hospital for $200,000. During the time period, it has been determined that the various costs of supplies necessary to operate the machine will be 15% of the lease payments during the 1st two years and 20% for the final 3 years of the lease. During this lease period, working capital needed will be $250,000. B) Assuming that we are able to achieve sales of $1,000,000 per year and keep other overhead costs at the amount of $300,000 per year what is the net present value of the machine assuming a discount rate of 9% ? Is the investment worth it (financially speaking)? C) How much interest did we pay over the life of the lease?
Generic Hospital has decided to invest in an Intuitive Robot called the Da Vinci. It is a robotic surgery device that is less invasive than standard surgeries and consequently allows shorter healing times and shorter length of stay in a hospital. The following are the terms of a lease for the DaVinci Robot: Fair Market Value Down Payment Lease Term (years) Interest Rate 1,922,633 250,000 5 4% A) What are the yearly payments associated with the lease of the robot? As part of the financial planning process, we have determined that the robot will last 5 years and we will be able to sell it to a foreign country hospital for $200,000. During the time period, it has been determined that the various costs of supplies necessary to operate the machine will be 15% of the lease payments during the 1st two years and 20% for the final 3 years of the lease. During this lease period, working capital needed will be $250,000. B) Assuming that we are able to achieve sales of $1,000,000 per year and keep other overhead costs at the amount of $300,000 per year what is the net present value of the machine assuming a discount rate of 9% ? Is the investment worth it (financially speaking)? C) How much interest did we pay over the life of the lease?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1008.
Transcribed Image Text:Generic Hospital has decided to invest in an Intuitive Robot called the Da Vinci. It is a robotic surgery device that is less
invasive than standard surgeries and consequently allows shorter healing times and shorter length of stay in a hospital. The
following are the terms of a lease for the DaVinci Robot: Fair Market Value Down Payment Lease Term (years) Interest Rate
1,922,633 250,000 5 4% A) What are the yearly payments associated with the lease of the robot? As part of the financial
planning process, we have determined that the robot will last 5 years and we will be able to sell it to a foreign country
hospital for $200,000. During the time period, it has been determined that the various costs of supplies necessary to operate
the machine will be 15% of the lease payments during the 1st two years and 20% for the final 3 years of the lease. During
this lease period, working capital needed will be $250,000. B) Assuming that we are able to achieve sales of $1,000,000 per
year and keep other overhead costs at the amount of $300,000 per year what is the net present value of the machine
assuming a discount rate of 9% ? Is the investment worth it (financially speaking)? C) How much interest did we pay over the
life of the lease?
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