Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for 5 years and then sold for $125,000. Humana uses a return requirement of 25% per year for all of its medical diagnostic equipment. As a bioengineering student currently serving a coop semester on the management staff of Humana Corporation in Louisville, Kentucky, you are asked to determine the minimum revenue required each year to realize the expected recovery and return. a. What is your answer? b. If the annual operating cost is expected to be $80,000 per year, what is the total revenue required to provide for recovery of capital, the 25% return and the annual expenses? c. Create a spreadsheet to show answers for a and b above.

Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for 5 years and then sold for $125,000. Humana uses a return requirement of 25% per year for all of its medical diagnostic equipment. As a bioengineering student currently serving a coop semester on the management staff of Humana Corporation in Louisville, Kentucky, you are asked to determine the minimum revenue required each year to realize the expected recovery and return. a. What is your answer? b. If the annual operating cost is expected to be $80,000 per year, what is the total revenue required to provide for recovery of capital, the 25% return and the annual expenses? c. Create a spreadsheet to show answers for a and b above.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its
medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for
5 years and then sold for $125,000. Humana uses a return requirement of 25% per year for all
of its medical diagnostic equipment. As a bioengineering student currently serving a coop
semester on the management staff of Humana Corporation in Louisville, Kentucky, you are
asked to determine the minimum revenue required each year to realize the expected recovery
and return.
a. What is your answer?
b.
If the annual operating cost is expected to be $80,000 per year, what is the total
revenue required to provide for recovery of capital, the 25% return and the annual
expenses?
c. Create a spreadsheet to show answers for a and b above.

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