Reference no: EM132848608

Question 1 - The Gonzaba Clinic is evaluating a project that costs $52,125 and has expected net cash flows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent.

a. What is the project's payback?

b. What is the project's NPV? Its IRR?

c. Is the project financially acceptable?

Question 1 - Assume that you are the CFO at Methodist Hospital in San Antonio. The CEO has asked you to analyze two proposed capital investments:

Project X and Project Y. Each project requires a net investment outlay of $10,000, and the cost of capital for each project is 12 percent. The project's expected net cash flows are as follows:

Year Project, X Project Y0-$10,000 -$10,0001 $6,500 $3,0002 $3,000 $3,0003 $3,000 $3,0004 $1,000 $3,000

a. Calculate each project's payback period, net present value (NPV), and internal rate of return (IRR).

b. Which project (or projects) is financially acceptable? Explain your answer.