u have been asked to evaluate the proposed acquisition of a new portable MRI. The system’s price is $70,000 and it will cost another $10,000 for transportation and installation the system is expected to be sold after three years because a new stationary machine will be acquired at that time the best estimate of the system salvage value after three years is $25,000 the system will have no impact on volume or reimbursement (and hence revenues) but it is expected to save $20,000 per year in operating costs the not for profit business corporate cost of capital is 10% and the standard risk adjustment is 4% points If the project has average risk, it is expected to be profitable?

u have been asked to evaluate the proposed acquisition of a new portable MRI. The system’s price is $70,000 and it will cost another $10,000 for transportation and installation the system is expected to be sold after three years because a new stationary machine will be acquired at that time the best estimate of the system salvage value after three years is $25,000 the system will have no impact on volume or reimbursement (and hence revenues) but it is expected to save $20,000 per year in operating costs the not for profit business corporate cost of capital is 10% and the standard risk adjustment is 4% points If the project has average risk, it is expected to be profitable?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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You have been asked to evaluate the proposed acquisition of a new portable MRI. The system’s price is $70,000 and it will cost another $20,000 for transportation and installation the system is expected to be sold after three years because a new stationary machine will be acquired at that time the best estimate of the system salvage value after three years is $30,000 the system will have no impact on volume or reimbursement (and hence revenues) but it is expected to save $20,000 per year in operating costs the not for profit business corporate cost of capital is 10% and the standard risk adjustment is 4% points What is the project's net investment outlay at time 0? What are the projects operating cash flows in years 1, 2, and 3? What is the terminal cash flow at the end of year 3? If the project has average risk, it is expected to be profitable?
1. You have been asked to evaluate the proposed acquisition of a new portable MRI. The system’s price is $70,000 and it will cost another $10,000 for transportation and installation the system is expected to be sold after three years because a new stationary machine will be acquired at that time the best estimate of the system salvage value after three years is $25,000 the system will have no impact on volume or reimbursement (and hence revenues) but it is expected to save $20,000 per year in operating costs the not for profit business corporate cost of capital is 10% and the standard risk adjustment is 4% points a. What is the project's net investment outlay at time 0? b. What are the projects operating cash flows in years 1, 2, and 3? c. What is the terminal cash flow at the end of year 3? d. If the project has average risk, it is expected to be profitable?
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