Add or drop with net present value analysis franklin county

Assignment Help Accounting Basics

Reference no: EM13484353

Add or drop with net present value analysis. Franklin county Hospital, a nonprofit hospital, bought and insatlled a new computer system last year for $65,000. The system is designed to relay information between labs and medical units. Charlene Walker, the hospital's new computer specialist, had a meeting with Lou Campbell, vice president of finance. She began: "Lou, today I read in journal that a new computer system has just been introduced. It costs $42,000, but I believed that by replacing our old system, we could reduce operating and maintenance costs that are now being incurred." The follolwing are Walker's estimates:

Purchase and installment price - Present System - $65,000

New System - $42,000

Useful life when purchased - Present System - 6 years

New System - 5 years

Computer Operating Costs - Present System - $30,000

New System - $20,000

Computer operating and - Present System - $20,000

maintenance costs per year- New System - $18,000

Depreciation expenses per year -Present System - $10,833

New System- $8,400

Costs of Capital - Present System - 10%

New System - 10%

a. Based on an analysis, what advice do you recommend that Walker give Campbell?

b. At what price for the new computer system would Campbell be indifferent?

c. Is this a typical make-or-buy decision? why?

Reference no: EM13484353

Questions Cloud

Calculate the value of a bond with a face value of 1000 a : calculate the value of a bond with a face value of 1000 a coupon interest rate of 8 percent paid semiannually and a

Abc co borrowed 420000 at 6 rate on june 1 2012 payable in : 1. journalize the following accrued expense transactionsa. xyz company purchased a one-year insurance policy on august

Sampp has a rating of bb on these bonds and the typical : you have been asked to estimate a riskless rate in indonesian rupiah. the indonesian government has rupiah denominated

What amount should an investor be willing to pay for a : what amount should an investor be willing to pay for a 1000 5-year united states government bond which pays 50 interest

Add or drop with net present value analysis franklin county : add or drop with net present value analysis. franklin county hospital a nonprofit hospital bought and insatlled a new

Rate of growth if a firms earnings increase from 300 per : rate of growth. if a firms earnings increase from 3.00 per share to 4.02 over a 6-year period what is the rate of

Explain why a 6-month treasury bill rate is not an : explain why a 6-month treasury bill rate is not an appropriate riskless rate in discounting a five-year cash

Suppose that a company borrows 20000 for 1 year at a : suppose that a company borrows 20000 for 1 year at a stated rate of interest of 9 percent. what is the annual

Tracey is a sales representative for a national : tracey is a sales representative for a national pharmaceutical company. she has a rather large sales territory and she

User Account

All Pages