Solve this one not use chatgpt Santa Cruz Community Hospital is considering investing$90,000 in new laundry equipment to replace the presentequipment which is completely depreciated andoutmoded. An alternative to this investment is a long-term contract with a local firm to perform the hospital'slaundry service. It is expected that the hospital wouldsave $20,000 per year in operating costs if the laundryservice was performed internally. The new laundryequipment has an expected life of 6 years with zerosalvage value.Santa Cruz can borrow or invest money at 8%. What isthe Profitability Index of investing in laundry equipment?a) 2.73%b) 3.27%c) 3.72%d) 7.23%

To calculate the Profitability Index (PI) of investing in the laundry equipment, we need to:1.…

Answered: Santa Cruz Community Hospital is…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Assume that the cost of capital for the company is 8 percent. Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project and explain why it is not suitable for choosing among mutually exclusive investments.
What is the npv of investing in laundry equipment?
Two locations are considered for a new public small hospital. Location A would require an investrment of $3.4 million and $55,000 per ycar to maintain. Location B would cost $4.8 million to construct. The operating cost of location B will be $43,000 per year. The benefits will be $550,000 per year at location A and 5750000 at location B The disbenefits associated with each location are $35,000 per year for location A and $45,000 per year for location B. Assame the hospital will be maintained indefinitely Use an interest rate of 12% per year to determine which location, if either, should be selected on the basis of the BC method.
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Diemia Hospital has been considering the purchase of a new xray machine. The existing machine is operable for five more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $150,000. The new machine will cost $640,000 and an additional cash investment in working capital of $75,000 will be required. The new machine will reduce the average amount of time required to take the xrays and will allow an additional amount of business to be done at the hospital. The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $160,000 each additional year of use. The new machine has a five year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. What is the net present value of the investment,…
Diemia Hospital has been considering the purchase of a new x−raymachine. The existing machine is operable for five more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $180,000. The new machine will cost $620,000 and an additional cash investment in working capital of $75,000 will be required. The new machine will reduce the average amount of time required to take the x−raysand will allow an additional amount of business to be done at the hospital. The investment is expected to net $130,000 in additional cash inflows during the year of acquisition and $190,000 each additional year of use. The new machine has a five−year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. What is the net present value of the investment,…
A hospital wants to buy a new MRI machine for $45,000. The annual revenue from the machine is estimated at $18,000 per year while maintenance costs per year are calculated to be $ 6,000. The salvage value at the end of the machine’s six-year operational life is $12,000. If the hospital’s MARR is 10% per year, should this investment be undertaken? (Use PW-Method).
An environmental consultant is considering the installation of a water storage tank for a client. The tank is estimated to have an initial cost of $426,000, and annual maintenance costs are estimated to be $6,400 per year. As an alternative, a holding pond can be provided a short distance away at an initial cost of $180,000 for the pond plus $90,000 for pumps and piping. Annual operating and maintenance costs for the pumps and holding pond are estimated to be $17,000. The planning horizon is 20 years, and at that time, neither alternative has any salvage value. Determine the preferred alternative based on a present worth analysis with a MARR of 20%/year.
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A project is being considered by the Tennessee Department of Transportation to replace an aging bridge across the Cumberland River on a state highway. The existing two-lane bridge is expensive to maintain and creates a traffic bottleneck because the state highway is four lanes wide on either side of the bridge. The new bridge can be constructed at a cost of $300,000, and estimated annual maintenance costs are $10,000. The existing bridge has annual maintenance costs of $18,500. The annual benefit of the new four-lane bridge to motorists, due to the removal of the traffic bottleneck, has been estimated to be $25,000. Conduct a B-C analysis, using a MARR of 8% and a study period of 25 years, to determine whether the new bridge should be constructed.
A project is being considered by the Tennessee Department of Transportation to replace an aging bridge across the Cumberland River on a state highway. The existing two-lane bridge is expensive to maintain and creates a traffic bottleneck because the state highway is four lanes wide on either side of the bridge. The new bridge can be constructed at a cost of $300,000, and estimated annual maintenance costs are $10,000. The existing bridge has annual maintenance costs of $18,500. The annual benefit of the new four-lane bridge to motorists, due to the removal ofthe traffic bottleneck, has been estimated to be $25,000. Conduct a B–C analysis, using aMARR of 8% and a study period of 25 years, to determine whether the new bridge should be constructed.
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4.87 million to setup and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $12 million during this year and depreciation expense will be another $3 million. THSI will require no working capital for this investment. THSI's marginal tax rate is 35%. Assume that THSI's cost of capital is 14.6% p.a. Compute the NPV of the temporary housing facility to the nearest dollar

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