Calculate the irr for the ten-year investment

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Reference no: EM131993658

The Eastern College of Veterinary Medicine Veterinary Teaching Hospital (VTH), a nonprofit tax-exempt organization, is considering leasing a CT unit for their radiology service. The lease term will be $47,784 paid annually for six years. At the end of the lease, the hospital will own the unit.

The radiologists would like to charge $375 per scan, and they expect to do 330 scans in the first year and 430 scans in each subsequent year. A maintenance agreement costs $104,000 per year, but that does not cover replacement of the tube. On average, a tube will last ten years at the projected volume, and a tube replacement will cost $140,000.

(a) In Excel, calculate the net present value (NPV) of the six-year lease term, using a discount rate of 5%.

(b) What would the NPV be if the college were able to operate the CT for ten years (four more years, without lease payments)?

(d) As the hospital director for the VTH, generate an executive summary that details why you would or would not recommend this investment. What are the risks?

Reference no: EM131993658

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