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A new cardiac catheterization lab was constructed at Have a Heart Hospital. The investment in this lab was $950,000 in equipment costs and $50,000 in

A new cardiac catheterization lab was constructed at Have a Heart Hospital. The investment in this lab was $950,000 in equipment costs and $50,000 in renovation costs. A desired return on investment is 12 percent. Once the lab was operating, 7,000 patients were served in the first year and were charged $640 for each procedure. The annual fixed cost for the catheterization lab is $2million, and the variable cost is $329 per procedure. What was the catheterization labs profit? Did this profit meet its desired ROI?

a. Determine the payback for the new dialysis unit.

b. Determine the NPV using a cost capital of 15 percent.

c. Determine the NPV at a cost of capital of 20 percent and compute the IRR.

d. At a 15 percent cost of capital, should the project be accepted? At a 20 percent cost of

capital, should the project be accepted? Explain.

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