Determine should southwest invest in the mri scanner

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Reference no: EM131989423

Southwest Specialty Clinic is considering adding an onsite MRI scanner. Current estimates are that the MRI scanner will cost $1,900,000 to purchase, install and prepare for use.

Cash flows expected from operation of the scanner during its estimated five year project life are:

Year	Cash flow
1	300,000
2	350,000
3	400,000
4	450,000
5	500,000

Southwest expects to be able to sell the MRI scanner for $200,000 at the end of year 5.

Southwest's cost of capital (opportunity cost) is 6% compounded monthly. Should Southwest invest in the MRI scanner?

PLEASE take into consideration the MONTHLY oppurtunity cost of 6% and resale value at the end of year 5 for $200,000. Please show your work.

Reference no: EM131989423

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