St. Carmen’s hospital is considering two alternatives and analyzing their consequences over a 3-year period on the hospital budget.     Alternative A = hire a pharmacist     Alternative B = Buy an automated drug delivery system machine         Alternative A’s costs are $90,000 salary plus 20% for fringe benefits per year for the next 3 years     Alternative B’s costs for the automated system are $220,000 for the first year, $35,000 for the second year, and $35,000 for the third year.     Alternative A’s savings are $150,000 per year for the next 3 years Alternative B’s savings are $120,000 per year for each of the 3 years Assuming a 5% discount rate, calculate: The net benefit of hiring a pharmacist The net benefit of the automated system The benefit-to-cost ratio of hiring a pharmacist The benefit-to-cost ratio for the automated system Which option, alternative A or alternative V, would be chosen based on the following: The net benefit calculations? Why? The benefit-to-cost ratios? Why?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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St. Carmen’s hospital is considering two alternatives and analyzing their consequences over a 3-year period on the hospital budget.     Alternative A = hire a pharmacist     Alternative B = Buy an automated drug delivery system machine         Alternative A’s costs are $90,000 salary plus 20% for fringe benefits per year for the next 3 years     Alternative B’s costs for the automated system are $220,000 for the first year, $35,000 for the second year, and $35,000 for the third year.     Alternative A’s savings are $150,000 per year for the next 3 years Alternative B’s savings are $120,000 per year for each of the 3 years Assuming a 5% discount rate, calculate: The net benefit of hiring a pharmacist The net benefit of the automated system The benefit-to-cost ratio of hiring a pharmacist The benefit-to-cost ratio for the automated system Which option, alternative A or alternative V, would be chosen based on the following: The net benefit calculations? Why? The benefit-to-cost ratios? Why?
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