19. (Mod. 6) ABC Hospital is a non-profit entity that does nothave to pay income taxes. Management is considering buying anautomated blood analysis machine that will significantly reduce thetime a lab technician spends working on a blood sample. The machinewill cost $80,000.00. Unfortunately, the machine’s operating lifeis somewhat short, and management expects it will be discarded (nosalvage value) at the end of four years. During its four yearoperating life, however, expected savings in annual variable costsshould amount to roughly $30,000.00 (measured at the end of eachyear). If it purchases the machine, the company will have to borrowthe entire $80,000 at an annual interest rate of 8% (APR).
Complete and submit an EXCEL worksheet, showing your work, andanswers highlighted in yellow,
(a) the present value of the expected overall savings in operatingcosts during the four years if the machine is purchased.
(b) the Internal Rate of Return on this investment.
(c) a narrative indicating whether, based on the calculations in(a) and (b), whether purchasing the machine makes sense.
