What is wrong with the board logic

Assignment Help Accounting Basics
Reference no: EM132713549

Questions -

Q1. The Ward County Hospital Center (WCHC) wants to buy a new mobile primary care van to use in screening residents in an underserved local neighborhood. The van will last 5 years and costs $68,000. WCHC will pay for the acquisition and maintenance of the van partially from foundation grants and partially from receipts from the county health department. The county has agreed to reimburse WCHC $15 for each patient it screens using the new van. They expects to have 800 patient per year with the van. It will cost $3,000 per year to maintain the vehicle, which includes relevant costs. WCHC uses a discount rate of 5%. How much will WCHC need in foundation grants this year to make the purchase break-even financially? (Hint: What I the net present value of the costs of buying and operating the van over its lifetime, less the payments that will be received from the county? Are the payments from the county sufficient? If not, how much must be raised in grants before the van is purchased?)

Q2. Community Health Center (CHC) is considering spending $50,000 on a blood analyzer. The annual cash profits from the machine will be $7,000 for each of the 7 years of its useful life. The board of directors wants to pursue this investment, because they think the $49,000 CHC will receive is close to the $50,000 cost. What is wrong with the board's logic? What is the IRR on the investment?

Q3. Why can the IRR method lead to suboptimal decision-making by organizations?

Reference no: EM132713549

Questions Cloud

Describe an effective leadership approach : Describe an effective leadership approach from a biblical perspective including core attributes and style and approach
Prepare the 2020 income tax return of George Pharmacy : Prepare the 2020 income tax return of George Pharmacy using the CANTAX tax software program assuming Valerie does not file a tax return
Create visual representation of the relationship : Create a visual representation of the relationship between program goals, objectives, and outcomes.
Main product and service offerings : If you could start a retail business (selling products and services to individuals and families), what would be your ideal retail business.
What is wrong with the board logic : Community Health Center (CHC) is considering spending $50,000 on a blood analyzer. What is wrong with the board's logic
Explain what are ethical implications of prenatal testing : What are the ethical implications of prenatal test?How do the ethical questions change when the method of prenatal testing is no longer amniocentesis, but PGD?
How external environment can impact on change strategies : Explain how external environment can impact on change strategies. And also Explain the importance of a participative management
Performance gap for low income women prenatal care : ABCD objectives and explain how you determined your objectives.
Underlying strategic people management : Critically assess the key principles and theories underlying strategic people management and explain how their application enhances organizational

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd