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 Hospital 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 AOC 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) Write the spreadsheet functions to display your answers.
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 Hospital 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 AOC 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) Write the spreadsheet functions to display
your answers.
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