Reference no: EM133187606

Question - Our ambulatory surgery center wishes to re-build. The capital cost is expected to be $3.1 million. That money will be borrowed at 6 percent interest and repaid over 15 years. The loan will be self-amortizing. An average of 145 operations are performed monthly.

a. What will be the yearly cost of repaying the loan?

b. What will be the total cost over 15 years?

c. How much of this total will be principal and how much of it is interest?

d. What increase in fixed cost per operation will result from the project? (Here's a way to think about this: Assuming that the project will not yield any offsetting savings through greater efficiency, and assuming that all operations bore equal shares of the higher fixed costs, how much will we have to raise our price per operation to pay for the construction project's yearly principal plus interest?)