Considering changing all their beds to foam mattresses

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Reference no: EM131517416

Kings Homeless Shelter is a not for profit facility. They are considering changing all their beds to foam mattresses. Foam mattresses make for more comfortable sleep and have less incidence of bed bugs. In addition the new beds will reduce operating cost by $950 per bed per year. Each foam bed is anticipated to cost $8,500 and would have a 10 year life. The shelter has 100 licenced beds. The cost to dispose of the old beds and move in the new beds is $50 per bed. There is a one time linen replacement and facility modification fee of $100 per bed. The current opportunity cost rate or rate for financing is 4%.

Detail the cash flows for the project. Calculate the NPV. Should the Shelter buy the new beds? Why or why not? (You can use excel or word for this work.)

Reference no: EM131517416

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