Bravo Community Hospital is a nonprofit hospital operated by thecounty. The hospital’s administrator is considering a proposal toopen a new outpatient clinic in the nearby city of New Castle. Theadministrator has made the following estimates pertinent to theproposal.

1. Construction of the clinic building will cost $840,000 in twoequal installments of $420,000, to be paid at the end of 20x0 and20x1. The clinic will open on January 2, 20x2. All staffing andoperating costs begin in 20x2.
2. Equipment for the clinic will cost $105,000, to be paid inDecember of 20x1.
3. Staffing of the clinic will cost $720,000 per year.
4. Other operating costs at the clinic will be $138,000 peryear.
5. Opening the clinic is expected to increase charitablecontributions to the hospital by $210,000 per year.
6. The clinic is expected to reduce costs at Allegheny CommunityHospital. Annual cost savings at the hospital are projected to be$920,000.
7. A major refurbishment of the clinic is expected to be necessarytoward the end of 20x5. This work will cost $135,000.
8. Due to shifting medical needs in the county, the administratordoubts the clinic will be needed after 20x9.
9. The clinic building and equipment could be sold for $210,000 atthe end of 20x9.
10. The hospital’s hurdle rate is 12 percent.

Use Appendix A for your reference. (Use appropriatefactor(s) from the tables provided.)

Required:

1. 1-3. Fill in the following table to compute thenet present value of the proposed outpatient clinic.

2. 4. Should the administrator recommend to thehospital's trustees that the clinic be built? YES OR NO

Fill in the following table to compute the net present value ofthe proposed outpatient clinic. (Negative amounts should beindicated by a minus sign. Round your "Discount factors" to 3decimal places.)

	Type of Cash Flow 20x0 20x1 20x2 20x3 20x4 20x5 20x6 20x7 20x8 20x9 1. Construction of clinic 2. Equipment purchase 3. Staffing 4. Other operating costs 5. Increased charitable contributions 6. Cost savings at hospital 7. Cost of refurbishment 9. Salvage value Incremental cash flow $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Discount factor Present value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Net present value $0