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a certain hospital is considering setting up a new facility. Management estimates that it will cost...

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Finance

a certain hospital is considering setting up a new facility.Management estimates that it will cost $1.5 million to purchase thenecessary equipment and renovate the building to support its longterm care services. The projected net cash flows generated by thenew facility over the next five years are given below:

Year 1 -0

Year 2 $380,000

Year 3 $400,000

Year 4 $420,000

Year 5 $440,000

Assuming a five year life and 8% cost of capital, compute thenet present value of this proposal. On the merits of your netpresent value computation, should this hospital invest in thisproject?

Answer & Explanation Solved by verified expert
4.1 Ratings (667 Votes)
Solution The net present value of this proposal is 24850921As per the NPV Rule or Criteria for evaluating a projectsacceptability1 If the    See Answer
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