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I am trying to determine operating cash flow for years 1, 2, 3 and 4 for a company who is evaluating a new MRI machine.
I am trying to determine operating cash flow for years 1, 2, 3 and 4 for a company who is evaluating a new MRI machine. I calculated the revenue based on # of scans times the net revenue for each scan and got $900,000. Should this figure remain the same for years 2, 3, and 4 or does the neutral inflation rate of 2% need to be added to each?
Also, does depreciation, variable and fixed costs change with the 2% neutral inflation rate? I am thinking that fixed costs and depreciation will not change.
1) Assume Bloomington Indiana Mellencamp Health System, a not-for profit hospital, is evaluating a new MRI. | ||||||||||
2) Cost | ||||||||||
Purchase price | $500,000 | |||||||||
Shipping and Install | $80,000 | |||||||||
3) Expected life | 5 years | |||||||||
4) Salvage Value | $250,000 | |||||||||
5) Utilization | 6000 scans per year | |||||||||
6) Net Revenue | $150 per scan | |||||||||
7) Variable Cost | $75 per scan | |||||||||
8) Fixed cost | $150,000 | |||||||||
9) Corporate cost of capital | 12% | |||||||||
Using 2% as neutral inflation rate |
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