Postaudit evaluation Daniel Harcrow is wondering whether he made the right decision four years ago. As the president of Harcrow Health Care Services, he acquired a hospital specializing in elder care with an initial cash investment of $5,600,000. Mr. Harcrow would like to know whether the hospital’s financial performance has met the original investment objective. The company’s discount rate (required rate of return) for present value computations is 14 percent. Expected and actual cash flows follow.

Required

a. Compute the net present value of the expected cash flows as of the beginning of the investment.

b. Compute the net present value of the actual cash flows as of the beginning of the investment.

c. What do you conclude from this postaudit?