St. Rose Hospital expects Project A and Project B to generate the following cash flows:Givens ( in thousands)Years012345Initial investment ($3,500) Net operating cash flows for Project A $2,500$2,000$1,500$1,000$600Net operating cash flows for Project B $600$1,000$1,500$2,000$2,500Determine the NPV for Project A using a cost of capital of 10%.Determine the NPV for Project B using a cost of capital of 10%.Which project should St. Rose pursue? Enter Project A or Project B as your answer.

1) NPV of project A: Hence, the NPV of project A is $2608.16. Working note:

Answered: St. Rose Hospital expects Project A and…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

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St. Rose Hospital expects Project A and Project B to generate the following cash flows:

Givens ( in thousands)	Years	0	1	2	3	4	5
Initial investment		($3,500)
Net operating cash flows for Project A			$2,500	$2,000	$1,500	$1,000	$600
Net operating cash flows for Project B			$600	$1,000	$1,500	$2,000	$2,500

Determine the NPV for Project A using a cost of capital of 10%.
Determine the NPV for Project B using a cost of capital of 10%.
Which project should St. Rose pursue? Enter Project A or Project B as your answer.

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