HKH (a not-for-profit organization) is considering opening a new cancer center. They Predict the following Net Cash Flows for the cancer center:

Givens Time 0 Yr 1 Yr2 Yr3 Yr4 Yr5

Initial Investment -40,000,000

Net operating cash flow 6,000,000 8,000,000 16,000,000 20,000,000 30,000,000

The initial investment includes all construction and equipment needed to set up the cancer center.

Net operating cash flow = patient revenues operating expenses such as supplies, personnel and utilities.

HKH valuating new service lines and projects of this nature.

A) What is the payback period?

B) What is the NPV?

C) If HKH uses straight line depreciation and assumes the useful life of the cancer center is 10 years (they are optimistic that cancer will be eliminated in 10 years) and has no salvage value, what would the annual depreciation amount be?

D) Map out the cash flows for time 0 through year 5 if HKH were for-profit Organization and paid a tax rate of 30%.