Washington Community is expecting its new dialysis unit to generate the following cash flows: Givens Years 1 3 4 Initial ($15,000,000) investment Net operating $2,000,000 $4,000,000 $5,000,000 $8,000,000 $16,000,000 cash flows REVIEW QUESTIONS AND PROBLEMS 32 а. Determine the payback for the new dialysis unit. b. Determine the NPV using a cost of capital of 15 percent. C. Determine the NPV at a cost of capital of 20 percent and compute the IRR. d. At a 15 percent cost of capital, should the project be accepted? At a 20 percent cost of capital, should the project be accepted? Explain.
Washington Community is expecting its new dialysis unit to generate the following cash flows: Givens Years 1 3 4 Initial ($15,000,000) investment Net operating $2,000,000 $4,000,000 $5,000,000 $8,000,000 $16,000,000 cash flows REVIEW QUESTIONS AND PROBLEMS 32 а. Determine the payback for the new dialysis unit. b. Determine the NPV using a cost of capital of 15 percent. C. Determine the NPV at a cost of capital of 20 percent and compute the IRR. d. At a 15 percent cost of capital, should the project be accepted? At a 20 percent cost of capital, should the project be accepted? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:12. Washington Community is expecting its new dialysis unit to generate the following cash
flows:
Givens
Years
1
2
3
4
5
Initial
($15,000,000)
investment
Net operating
$2,000,000 $4,000,000 $5,000,000 $8,000,000 $16,000,000
cash flows
REVIEW QUESTIONS AND PROBLEMS
329
а.
Determine the payback for the new dialysis unit.
b. Determine the NPV using a cost of capital of 15 percent.
C.
Determine the NPV at a cost of capital of 20 percent and compute the IRR.
d. At a 15 percent cost of capital, should the project be accepted? At a 20 percent cost
of capital, should the project be accepted? Explain.
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