progressive hospital is considering the puchase of a new sidewinder scanner, which costs 3,000,000. The new scanner provides a 360 degree internal feature view of the organ or body part being scanned, with no radiation exposure. The medical staff estimates that the technology will last five years before it will need to be replaced with newer technology. The equipment will have no salvage value. Scan volume has been estimated as follows: year 1 10,000 year 2 12,000 year 3 15,000 year 4 15,000 year 5 15,000. average billing price is stimated to be $100 per scan. The scanner will have fixed operating costs of $350,000 per year and variable operating costs of $10 per scan. What is the payback period for the scanner? What is the NPV of the investment assuming a 10 percent hurdle rate for capital investments? What is the IRR for the project? Is the project financially profitable if volume turns out to only be 95 percent of the projection? Would the project be financially profitable at a 95 percent volume level if the equipment had a $500,000 salvage value? Ignoring the conditions in question 4 and 5, what if Progressive hosptial adjusts its 10 percent hurdle rate +2 percent for high risk projects or -2 percent for low risk projects, and the sidewinder project is judged to be low risk? Should the scanner be purchased?
progressive hospital is considering the puchase of a new sidewinder scanner, which costs 3,000,000. The new scanner provides a 360 degree internal feature view of the organ or body part being scanned, with no radiation exposure. The medical staff estimates that the technology will last five years before it will need to be replaced with newer technology. The equipment will have no salvage value. Scan volume has been estimated as follows: year 1 10,000 year 2 12,000 year 3 15,000 year 4 15,000 year 5 15,000. average billing price is stimated to be $100 per scan. The scanner will have fixed operating costs of $350,000 per year and variable operating costs of $10 per scan. What is the payback period for the scanner? What is the NPV of the investment assuming a 10 percent hurdle rate for capital investments? What is the IRR for the project? Is the project financially profitable if volume turns out to only be 95 percent of the projection? Would the project be financially profitable at a 95 percent volume level if the equipment had a $500,000 salvage value? Ignoring the conditions in question 4 and 5, what if Progressive hosptial adjusts its 10 percent hurdle rate +2 percent for high risk projects or -2 percent for low risk projects, and the sidewinder project is judged to be low risk? Should the scanner be purchased?
