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(0.5 points) 2. Heartfield Hospital is considering adding an additional Operating Room Suite. It is expected that the initial investment will cost $15,600,000. Estimates
(0.5 points) 2. Heartfield Hospital is considering adding an additional Operating Room Suite. It is expected that the initial investment will cost $15,600,000. Estimates for revenues and expenses over a six-year time horizon are as follows, as well as equipment salvage value at the end of year 6: Net Revenue Operating Expense Salvage Value Years 1 2 3 S $1,540,000 $2,540,000 $2,100,000 $3,300,000 $7,000,000 $9,700,000 $1,000,000 $1,000,000 $750,000 $ 555,000 $610,000 $800,000 $ 100,000 a) Assuming a cost of capital of 7%, calculate the Net Present value (NPV) for the Operating Room Suite addition. (1.5 points) b) Should Heartfield Hospital proceed with the addition of another Operating Room. Provide justification for your answer from a financial perspective. (0.5 points)
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