Northeast Hospital is analyzing a potential project for a new outpatient center

Use the following facts to create 5-year projection of flow for the proposed center.

Create full income statement first to include all and non-cash expenses

Using excel, calculate the projects NPV, IRR, MIRR, Payback Period (not discounted). Using these calculations, should the project be proceeded? Explain the answer

Year 1 Year 2 Year 3 Year 4 Year 5

Total projected Visits 52500

Average Revenue per visit $75.00

Average Variable Cost per Visit $50.00

Total Fixed Costs $500,000.00

Purchase Price for Equipment $4,500,000.00

Monthly Rental Cost to Occupy the New Site $5,000.00

Salvage Values of the Equipment (end of Year 5) $750,000.00

Corporate Tax Rate 40%

Cost of Capital 8%

Other Assumptions

1) Projected Visits are Expected to increase by 10% in Year 2, 5% in Year 3 and 3% each Year thereafter

2)Negotiation with payers indicate that revenue rate (ie payment per visits) will increase by 2% each year and 5% in year 5

3)Variable Costs are expected to rise at a rate of 2% per year

4) Fixed Costs are expected to rise at a rate of 1% per year

6) Rent rates will be increased by 2.5% at the end of each year

6) The equipment will depreciate based on the straight-line method of depreciation, a 5-year estimated life and the equipment will be sold at salvage value at the end of year 5

7)Tax rate will remain constant for the entire 5-year Period and do not assume any tax loss carry forward