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Santa Cruz Community Hospital is considering investing $90,000 in new laundry equipment to replace its present equipment which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local firm to perform the hospital's laundry service. It is expected that the hospital would save $20,000 per year in operating costs if the laundry service were performed internally. The new laundry equipment has an expected life of 6 years with zero salvage value. Santa Cruz can borrow or invest money at 8%. What is the NPV of investing in laundry equipment?

Santa Cruz Community Hospital is considering investing $90,000 in new laundry equipment to replace its present equipment which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local firm to perform the hospital's laundry service. It is expected that the hospital would save $20,000 per year in operating costs if the laundry service were performed internally. The new laundry equipment has an expected life of 6 years with zero salvage value. Santa Cruz can borrow or invest money at 8%. What is the NPV of investing in laundry equipment?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Santa Cruz Community Hospital is considering investing $90,000 in new laundry equipment to replace its present equipment which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local firm to perform the hospital's laundry service. It is expected that the hospital would save $20,000 per year in operating costs if the laundry service were performed internally. The new laundry equipment has an expected life of 6 years with zero salvage value. Santa Cruz can borrow or invest money at 8%. What is the NPV of investing in laundry equipment?
Transcribed Image Text:Santa Cruz Community Hospital is considering investing $90,000 in new laundry equipment to replace its present equipment which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local firm to perform the hospital's laundry service. It is expected that the hospital would save $20,000 per year in operating costs if the laundry service were performed internally. The new laundry equipment has an expected life of 6 years with zero salvage value. Santa Cruz can borrow or invest money at 8%. What is the NPV of investing in laundry equipment?
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