Making Waves Clinic Scenario You are an administrative intern at Beach Front Hospital. Beach Front Hospital is considering opening a not for profit clinic that would operate out of a converted bus in a parking lot. Your boss has asked you to look into the financial implications of this clinic. The bus, including all the conversion work that would need to be done to set it up and outfit it as a medical clinic (it was previously a touring bus for a rock band) would cost $480,000. It is anticipated this bus will have a 5 year life because the corrosion from ocean spray and sea gull damage. The lot where the bus would be placed would be rented from the county park system. 1 The projected yearly revenues and operating cost (including rent for the lot) are listed below. For a project this risky, Beach Front Hospital uses a discount rate of 15% Year 1 200,000 Year 2 320,000 Year 3 335,000 Year 4 350,000 Year 5 400,000 Time 0 Patient Revenue Operating -480,000 Cost Profit/(loss) (480,000) 200,000 100,000 100,000 125,000 150,000 0 220,000 235,000 225,000 250,000 1) What impact would it have on the payback period and NPV if operating costs are 7% greater than anticipated due to continued inflation? Note: Evaluate the 3 situations presented in questions 3 and 4 separately