What is the projects net present value

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Calexico Hospital plans to invest in a new MRI machine. The cost of the MRI is $1.6 million. The MRI has an economic life of 5 years, and it will be depreciated over a five-year life to a $200,000 salvage value. Additional revenues attributed to the new MRI will be in the amount of $1.5 million per year for 5 years. Additional operating expenses, excluding depreciation expense, will amount to $1 million per year for 5 years. Over the life of the machine, net working capital will increase by $30,000 per year for 5 years.

Question 1: Assuming that the hospital is a non-profit entity, what is the project's net present value (NPV) at a discount rate of 8%, and what is the project's IRR?

Question 2: Assuming that the hospital is a for-profit entity and the tax rate is 30%, what is the project's NPV at a cost of capital of 8%, and what is the project's IRR?

Reference no: EM132506810

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