Option i C/R Option ii C/R One Time Costs One Time Costs Land-$10 million (Year 1) C Renovations- $35M (Year 0) C Construction- $100 million ($50 M per year for 2 years C Medical Equipment- $20M (Year 0) C Medical equipment- $25million (Year 0) C Licensing & Consulting- $5M (Year 0) C Licensing & Consulting- $15M (spread across year 1 and 2) C Initial Marketing Campaign- $2M (Year 1) C Initial Marketing Campaign- $5 million (Year 3) C Annual Values Annual Values Operations & Staff- $7M / year (Year 2+) C Operations & Staff- $11M / year (Year 3+) C Maintenance- $2M / year (Year 2+) C Maintenance- $2.5M / year (Year 3+) C Tech Updates- $1.2M / year (Year 3+) C Tech Updates-$1.5M / year (Year 5+) C Overhauls Overhauls Equipment Repairs- $13M (Year 10) C Equipment Repairs- $18M (Year 10) C Facilities Upgrades- $20M (Year 15) C Facilities Upgrades- $25M (Year 15) C Revenue Revenue From Year 2-9: starts at $18M, increases by $5 M annually R From Year 3-10: starts at $60 M, increases by $5 M annually R Year 10 +: 58M annually R Year 11+: 100M annually R Salvage value- $15M (Year 20) R Salvage value- $25M (Year 20) R Assuming an interest rate of 3% per year (effective), calculate the feasibility of each option. You can use either Present Worth Analysis or Equivalent Uniform Worth Analysis. In this part, your calculation should be done without the use of Excel. Show your equations and the results.
|
Option i |
C/R |
Option ii |
C/R |
|
One Time Costs |
|
One Time Costs |
|
|
Land-$10 million (Year 1) |
C |
Renovations- $35M (Year 0) |
C |
|
Construction- $100 million ($50 M per year for 2 years |
C |
Medical Equipment- $20M (Year 0) |
C |
|
Medical equipment- $25million (Year 0) |
C |
Licensing & Consulting- $5M (Year 0) |
C |
|
Licensing & Consulting- $15M (spread across year 1 and 2) |
C |
Initial Marketing Campaign- $2M (Year 1) |
C |
|
Initial Marketing Campaign- $5 million (Year 3) |
C |
Annual Values |
|
|
Annual Values |
|
Operations & Staff- $7M / year (Year 2+) |
C |
|
Operations & Staff- $11M / year (Year 3+) |
C |
Maintenance- $2M / year (Year 2+) |
C |
|
Maintenance- $2.5M / year (Year 3+) |
C |
Tech Updates- $1.2M / year (Year 3+) |
C |
|
Tech Updates-$1.5M / year (Year 5+) |
C |
Overhauls |
|
|
Overhauls |
|
Equipment Repairs- $13M (Year 10) |
C |
|
Equipment Repairs- $18M (Year 10) |
C |
Facilities Upgrades- $20M (Year 15) |
C |
|
Facilities Upgrades- $25M (Year 15) |
C |
Revenue |
|
|
Revenue |
|
From Year 2-9: starts at $18M, increases by $5 M annually |
R |
|
From Year 3-10: starts at $60 M, increases by $5 M annually |
R |
Year 10 +: 58M annually |
R |
|
Year 11+: 100M annually |
R |
Salvage value- $15M (Year 20) |
R |
|
Salvage value- $25M (Year 20) |
R |
|
|
Assuming an interest rate of 3% per year (effective), calculate the feasibility of each option. You can use either Present Worth Analysis or Equivalent Uniform Worth Analysis. In this part, your calculation should be done without the use of Excel. Show your equations and the results.
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