Question
Crimson Medical Group is considering an investment in a new MRI machine. The cost of purchasing the machine today is $700,000. The machine is expected
Crimson Medical Group is considering an investment in a new MRI machine. The cost of purchasing the machine today is $700,000. The machine is expected to generate private patient revenues of $200,000 and Medicare patient revenues of $250,000 at the end of each year, for 3 years. At the end of year 3, Crimson will have to pay $200,000 in software update costs and $300,000 in maintenance costs for the machine. Assume that the project cost of capital is 10%. a. [6 pts] Calculate the estimated return on investment (in dollar terms). b. [6 pts] Calculate the investments MIRR. c. [2 pts] Should Crimson make this investment? In one sentence, provide a justification for your answer.
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