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A public hospital has a shock trauma unit that costs $700,000 per year to run in real dollars. The local department of health values the
A public hospital has a shock trauma unit that costs $700,000 per year to run in real dollars. The local department of health values the benefits of the trauma unit (in lives saved) at $1,200,000 per year in real dollars. If the nominal interest rate is 6 percent and the inflation rate is 3 percent, what is the net present value (NPV) of running the trauma unit for 3 years? Assume that cost and benefits are incurred at the end of each year and that there is no terminal value.
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