A Babies hospital is considering to purchase a diagnostic machine costing $80,000. 50% Of the price is payable in first year and 50% is payable in 3nd year. The projected life of the machine is 8 years and has an expected salvage value of $6,000 at the end of 8 years.

The annual operating cost of the machine is $15,500, including depreciation. It is expected to

generate

revenues of $40,000 per year for eight years. Presently, the hospital is outsourcing the diagnostic work and is caring commission income of $12,000 per annum; net of taxes.

required

Net Present Value method

IRR assuming required rate is 10%

Profitability Index method.