Question
ManchesterClinic?, a nonprofit?organization, estimates that it can save $29,000 a year in cash operating costs for the next 88 years if it buys a?special-purpose eye-testing
ManchesterClinic?, a nonprofit?organization, estimates that it can save $29,000 a year in cash operating costs for the next 88 years if it buys a?special-purpose eye-testing machine at a cost of $115,000. No terminal disposal value is expected. ManchesterClinic's required rate of return is 10?%. Assume all cash flows occur at?year-end except for initial investment amounts. ManchesterClinic uses?straight-line depreciation.
1. Calculate the following for the?special-purpose eye-testing?machine:
a. Net present value
b. Payback period
c. Internal rate of return
d. Accrual accounting rate of return based on net initial investment
e. Accrual accounting rate of return based on average investment
2. What other factors should ManchesterClinic consider in deciding whether to purchase the?special-purpose eye-testing?machine?
Present Value of $1 Periods 2% 4% 1 0.980 0.962 2 0.961 0.925 3 0.942 4 0.924 0.889 0.855 0.906 0.822 6 0.888 0.790 7 0.871 8 0.853 9 0.837 0.760 0.731 0.703 10 0.820 0.676 11 0.804 0.650 12 0.788 0.625 13 0.773 0.601 14 0.758 0.577 15 0.743 16 0.728 0.555 0.534 17 0.714 0.513 18 0.700 0.494 19 0.686 0.475 20 0.673 0.456 21 0.660 0.439 22 0.647 0.422 23 0.634 0.406 24 0.622 0.390 25 0.610 0.375 26 0.598 0.361 27 0.586 0.347 28 0.574 0.333 29 0.563 0.321 30 0.552 0.308 35 0.500 0.253 40 0.453 0.208 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 40% Periods 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.758 0.714 1 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.672 0.650 0.630 0.610 0.592 0.574 0.510 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.551 0.524 0.500 0.477 0.455 0.435 0.364 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.451 0.423 0.397 0.373 0.350 0.329 0.260 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.370 0.341 0.315 0.291 0.269 0.250 0.186 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.189 0.133 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 0.159 0.143 0.095 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.204 0.179 0.157 0.139 0.123 0.108 0.068 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.167 0.144 0.125 0.108 0.094 0.082 0.048 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 0.137 0.116 0.099 0.085 0.073 0.062 0.035 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 0.112 0.094 0.079 0.066 0.056 0.047 0.025 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.092 0.076 0.062 0.052 0.043 0.036 0.018 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 0.075 0.061 0.050 0.040 0.033 0.027 0.013 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 0.062 0.049 0.039 0.032 0.025 0.021 0.009 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 0.051 0.040 0.031 0.025 0.020 0.016 0.006 0.394 0.292 0.218 0.163 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.012 0.005 0.371 0.270 0.198 0.146 0.108 0.080 0.060 0.045 0.034 0.026 0.020 0.015 0.012 0.009 0.003 0.350 0.250 0.180 0.130 0.095 0.069 0.051 0.038 0.028 0.021 0.016 0.012 0.009 0.007 0.002 0.331 0.232 0.164 0.116 0.083 0.060 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.005 0.002 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.019 0.014 0.010 0.007 0.005 0.004 0.001 0.294 0.199 0.135 0.093 0.064 0.044 0.031 0.022 0.015 0.011 0.008 0.006 0.004 0.003 0.001 0.278 0.184 0.123 0.083 0.056 0.038 0.026 0.018 0.013 0.009 0.006 0.004 0.003 0.002 0.001 0.262 0.170 0.112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 0.002 0.000 0.247 0.158 0.102 0.066 0.043 0.028 0.019 0.013 0.008 0.006 0.004 0.003 0.002 0.001 0.000 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 0.007 0.005 0.003 0.002 0.001 0.001 0.000 0.220 0.135 0.084 0.053 0.033 0.021 0.014 0.009 0.006 0.004 0.002 0.002 0.001 0.001 0.000 0.207 0.125 0.076 0.047 0.029 0.018 0.011 0.007 0.005 0.003 0.002 0.001 0.001 0.001 0.000 0.196 0.116 0.069 0.042 0.026 0.016 0.010 0.006 0.004 0.002 0.002 0.001 0.001 0.000 0.000 0.185 0.107 0.063 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 0.000 0.000 0.000 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0.003 0.002 0.001 0.001 0.000 0.000 0.000 0.130 0.068 0.036 0.019 0.010 0.006 0.003 0.002 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 35 40
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