Details of this Paper

Project A: Payback Period 5.5 years NPV 137,875.26 and IRR of 20.78 percent

Description

solution


Question

Project A: Payback Period 5.5 years NPV 137,875.26 and IRR of 20.78 percent;Project B: Payback period 5.4 years, NPV 582,053.05, IRR of 34.92%.;Rancho Verde Medical Center a not-for profit hospital, is considering two projects. Provided below is the financial information for each project. Based on this information, please calculate the NPV, payback period, and IRR for each project. The cost of capital for this project is 14 1/8%.;Project A;Equipment Costs $725,000;Related Start-up Costs: $ 49,000;Salvage Value: $73,000;Useful Life: 5 Years;Straight line depreciation is used;Revenue: $272 per procedure;Variable Costs: $58 procedure;Annual fixed costs: $585,000;Annual Overhead allocation: $99,000;Estimated procedure in year one: 3,875;It is estimated that the number of procedures will increase by 9 percent each year, fixed costs will increase by 6 percent, overhead and variable costs will increase by 7 percent, revenue per procedure will increase by 3 percent each year. (increases will begin after first year);Project B;Equipment Costs $815,000;Training Costs: $54,000;Salvage Value: $68,000;Useful Life: 5 Years;Straight line depreciation is used;Revenue: $294 per procedure;Variable Costs: $82 procedure;Annual fixed costs: $598,000;Annual Overhead allocation: $108,000;Estimated procedure in year one: 4,175;It is estimated that the number of procedures will increase by 12 percent each year, fixed costs will increase by 5 percent, overhead and variable costs will increase by 8 percent, revenue per procedure will increase by 2 percent each year. (increases will begin after first year);Additional Requirements;Min Pages: 1;Level of Detail: Show all work

 

Paper#21869 | Written in 18-Jul-2015

Price : $27
SiteLock