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Acme hospital has estimated the following cash flows for a proposed new service: Year Expected Net Cash Flow 0 ($200,000) 1 140,000 2 100,000
Acme hospital has estimated the following cash flows for a proposed new service: Year Expected Net Cash Flow 0 ($200,000) 1 140,000 2 100,000 3 40,000 The project's opportunity cost is capital is 8 percent. Answer the following questions and show your work (if you use a spreadsheet show the output and formulas; if you use a financial calculator, indicate which buttons were pushed or give the web address): A. Assuming cash flows occur evenly during the year, what is the project's payback period? What does this number mean? B. What is the project's NPV? Based on NPV is this project expected to be profitable, why or why not? C. What is the project's IRR? Based on IRR is this project expected to be profitable, why or why not?
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