Key West Hospital is considering investing in a new CT scanner which has improved images and...

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Key West Hospital is considering investing in a new CT scannerwhich has improved images and requires less use of contrast mediafor some scans.
The cost of the machine is $1.5 million and it will require$300,000 of renovation and installation cost.
The machine is capable of doing 1700 scans per year, but it isestimated that the first year demand will be about 1,300 scans.
The market suggest that volume will grow about 8% per year untilcapacity is reached.
Taking into consideration all payers, the average net revenueper scan is $900, but because of pressure in the market that ratewill not change in the forseeable future.
It will take two technicians to run the machine (regardless ofvolume) at an average cost including benefits of $75,000 (for eachtech) per year. Compensation is expected to inflate at 3% peryear.
Supplies are expected to be about $300 per scan, with an annualinflation expectation of 2.0%.
The machine will have a full warranty for the first year, butwill then require a maintenance contract for years 2-5. The priceof the maintenance contract will be 2% of the purchase price, paidannually.
Expected life of item is 5 years, with a $25,000 salvagevalue
Corporate cost of capital 11.5%
Question: Calculate the NPV, IRR and MIRR for a 5year projection

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Transcribed Image Text

Key West Hospital is considering investing in a new CT scannerwhich has improved images and requires less use of contrast mediafor some scans.The cost of the machine is $1.5 million and it will require$300,000 of renovation and installation cost.The machine is capable of doing 1700 scans per year, but it isestimated that the first year demand will be about 1,300 scans.The market suggest that volume will grow about 8% per year untilcapacity is reached.Taking into consideration all payers, the average net revenueper scan is $900, but because of pressure in the market that ratewill not change in the forseeable future.It will take two technicians to run the machine (regardless ofvolume) at an average cost including benefits of $75,000 (for eachtech) per year. Compensation is expected to inflate at 3% peryear.Supplies are expected to be about $300 per scan, with an annualinflation expectation of 2.0%.The machine will have a full warranty for the first year, butwill then require a maintenance contract for years 2-5. The priceof the maintenance contract will be 2% of the purchase price, paidannually.Expected life of item is 5 years, with a $25,000 salvagevalueCorporate cost of capital 11.5%Question: Calculate the NPV, IRR and MIRR for a 5year projection