Question
10 The business manager of a healthcare clinic can invest $250,000 in a new information system that provides a portal for doctor-patient-pharmacy communications and consolidates
10 The business manager of a healthcare clinic can invest $250,000 in a new information system that provides a portal for doctor-patient-pharmacy communications and consolidates all medical and pharmaceutical records. As a result of automation and streamlined data storage, the system will reduce labor costs and increase net operating cash flows after taxes by $75,000 in the first year. The net operating cash flows are expected to increase by a 2% inflation rate for each year after the first year. The information system has an expected useful life of 5 years with zero salvage value. The required return for projects of this risk class is 8%.
a) Draw a time line to illustrate the project.
b) What is the net present value for the project?
c) What is the internal rate of return for the project?
d) What is the payback period for the project? Provide a table with project cash flows and cumulative cash flows to illustrate how you calculate the payback period.
e) Should you invest
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