Daisy Hill Hospital is planning to replace its CT scan machine. The machine system costs approximately $2,500,000, and an additional $500,000 for installation. Estimated charges per scan is $600. There is an estimated weekly utilization (volume) of 30 scans. Each scan will cost the hospital $35 in supplies. The system is expected to operate for $50 weeks per year. Associated annual labor costs for purchasing the CT scan machine is an estimated $100,000. Maintenance costs are estimated to be $80,000, and the machine is expected to be in operation for a period of 5 years. The machine may sell for approximately $500,000 salvage value. Daisy Hill has an 8% corporate cost of capital, and inflation is expected to average 3% over the period.

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