None View PoliciesCurrent Attempt in ProgressA hospital is considering purchasing a new medical dispensingcabinet that will cost $290,000. It believes that this cabinet willreduce the amount of labor required to track and administermedications and will also result in fewer expired medicines. Itestimates the medical dispensing cabinet will result in a savingsof $34,000 at the end of year one and that the savings willincrease by $8,000 per year for each of the 8 years that themachine will be used. What is the IRR of this investment?Click here to access the TVM Factor Table calculator.%Carry all interim calculations to 5 decimal places and thenround your final answer to 1 decimal place. The tolerance is±0.3.If the hospital's MARR is 12%, should they invest in this cabinet?

The hospital is contemplating a new medical dispensing cabinet with a hefty price tag of $290,000.…

Answered: View Policies Current Attempt in…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 5CE: Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the...

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View Policies Current Attempt in Progress A hospital is considering purchasing a new medical dispensing cabinet that will cost $290,000. It believes that this cabinet will reduce the amount of labor required to track and administer medications and will also result in fewer expired medicines. It estimates the medical dispensing cabinet will result in a savings of $34,000 at the end of year one and that the savings will increase by $8,000 per year for each of the 8 years that the machine will be used. What is the IRR of this investment? Click here to access the TVM Factor Table calculator. % Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.3. If the hospital's MARR is 12%, should they invest in this cabinet?
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.
Consider a proposal to enhance the vision system used by a postal service to sort mail. The new system is estimated to cost $1.1 million and will incur an additiona $200,000 per year in maintenance costs. The system will produce annual savings of $500,000 each year (primarily by decreasing the percentage of misdirected mail and reducing the amount of mail that must be sorted manually). The MARR is 10% per year, and the study period is five years at which time the system will be technologically obsolete (worthless). The PW of this proposal is PW(10%) = −$1,100,000 + ($500,000 − $200,000)(P/A, 10%, 5) = $37,236. Determine how sensitive the decision to invest in the system is to the estimates of investment cost and annual savings.
. A hospital director is considering two alternative investment programs. Both have costs of $5,000 in year 1 only. Project 1 provides benefits of $2,000 in each of the first 4 years only. Project 2 provides benefits of $ 2,000 for years 6 to 10 only. a. Compute the net benefits using a discount rate of 6 percent. b. Knowing that the calculations are dependent on the discount rate, conduct a sensitivity analysis by re - calculating with a discount rate of 12 percent. Based on your calculations, which investment program should the director choose?
Below are the projected revenues and expenses for a new clinical nurse specialist program being established by a hospital. Nurses would provide education while the patient is in the hospital and home visits after patient discharge on a fee-for-service basis. Should the hospital undertake the program if its required rate of return is 12%? Year 1 Year 2 Year 3 Year 4 Total Revenue costs 100,000 150,000 200,000 250,000 700,000 150,000 150,000 150,000 150,000 600,000 (50,000) 0 50,000 100,000 100,000
Lutheran Regional Hospital uses a planning process to define a new radiology service line. The decision matrix gave it a high priority, and administrators want to evaluate its financial feasibility. Estimated fixed costs are $1 million, and the estimated net reimbursement level is $1,500 per procedure. Physician and other provider salaries on a direct basis are $340 per procedure, and total operating expenses will add another $160 per procedure. If Lutheran Regional discovered a way to reduce the total initial investment to $600,000, causing the average pricing level to fall to $1,200 and the other assumptions to stay the same, how many procedures would be required to break even?
The Dental Clinic, Inc. is contemplating replacing an obsolete word processing system with one of two innovative lines of equipment. Alternative 1 requires a current investment layout of $26,022, whereas alternative 2 requires an outlay of $31,048. The following cash flows (cost savings) will be generated each year over the five-year useful lives of the new systems. Probability Cash Flow $7,000 10,000 13,000 $7,500 10,000 12,500 Alternative 1 0.32 0.36 0.32 Alternative 2 0.18 0.64 0.18 6a) Calculate the expected cash flow for each investment alternative.
The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billing costs. The computer system will last for nine years and have no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-2 to determine the appropriate discount factor(s) using tables. Required: What is the maximum price (l.e., the price that exactly equals the present value of the annual savings in billing costs) Atlantic Medical Clinic should be willing to pay for the new computer system if the clinic's required rate of return is: Note: Round your final answer to the nearest whole dollar amount. Maximum Price 1. Seven percent 2. Eleven percent
Vancouver Shakespearean Theater's board of directors is considering the replacement of the theater's lighting system. The old system requires two people to operate it, but the new system would require only a single operator. The new lighting system will cost $115,700 and save the theater $24,000 annually for the next eight years. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Exercise 16-28 New Present Value with Different Discount Rates (Section 1) (LO 16-1) Required: 1-a. Prepare a table showing the proposed lighting system's net present value for each of the following discount rates: 8 percent, 10 percent, 12 percent, 14 percent, and 16 percent. 1-b. Based on your findings in requirement 1-a., Which statement is true? Complete this question by entering your answers in the tabs below. Req 1A Prepare a table showing the proposed lighting system's net present value for each of the following discount rates: 8 percent, 10 percent, 12 percent, 14…
The hospital is considering the purchase of imaging equipment worth $25,000 to improve its visual capture results, and improve outcomes. The operating costs will be reduced by $7,000 per year. The computer has an estimated life expectancy of 5 years, and an estimated salvage value of $5,000. What is the profitability index if the discount rate is 8%. Ignore reimbursement considerations.
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
A hospital just purchased upgraded software for the Electronic Medical Record surgical dashboard. The additional surgical dashboard application costs $4,000 now, and will require additional annual payments in years 2 through 8, with new monitors that will cost $10,000 in year 3 and Use an interest rate of 12%, compounded annually. What is the present worth in year 0 of the payments and costs if the interest rate is 12% per year?

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