Part 2

Question 2 Draw the cash flow diagram associated to each option.

Question 3 - Assuming an interest rate of 3% per year (effective), calculate the feasibility of each option. You can use either Present Worth Analysis or Equivalent Uniform Worth Analysis. In this part, your calculation should be done without the use of Excel. Show your equations and the results.

Option A: Building a New Wing 1. One-Time Costs: - Land \& site preparation: \$10 million (Year 0) - Construction: $100 million (\$50 million in Year 0 and $50 million in Year 1) - Medical equipment: \$25 million (Year 0) - Licensing and consulting: $15 million (spread across Years 0 and 1) - Initial marketing campaign: \$5 million (Year 2) 2. Annual Values: - Operations \& staff: \$11 million/year (Year 2 onwards) - Maintenance: \$2.5 million/year (Year 2 onwards) - Technology updates: \$1.5 million/year (Year 4 onwards) 3. Overhauls: - Equipment repairs: \$18 million (Year 10) - Facility upgrades: $25 million (Year 15) 4. Revenue: - From Year 3 to 10 : Starting at $60 million and increasing by $5 million annually. - From Year 11 onward: Stabilizing at $100 million annually. - Salvage Value of existing equipment: \$25 million (Year 20) Option B: Upgrading Existing Infrastructure 1. One-Time Costs: - Renovations: \$35 million (Year 0) - Medical equipment: \$20 million (Year 0) - Licensing \& consulting: \$5 million (Year 0) - Initial marketing campaign: \$2 million (Year 1) 2. Annual Values: - Operations \& additional staff: \$7 million/year (Year 2 onwards) - Maintenance: \$2 million/year (Year 2 onwards) - Technology updates: \$1.2 million/year (Year 3 onwards) 3. Overhauls: - Equipment repairs: \$13 million (Year 10) - Facility upgrades: \$20 million (Year 15) 4. Revenue: - From Year 2 to 9: Starting at $18 million and increasing by $5 million annu - From Year 10 onward: Stabilizing at \$58 million annually. - Salvage Value: \$15 million (Year 20) I hope this email finds you well and that you are making good progress on your final project. I wanted to bring to your attention some important changes that have been made to the project requirements, specifically in Option A and Option B. Option A: The year associated with medical equipment has been updated from " 1" to 00." The values of revenue in Option A have also been modified. Option B: The values of revenue in Option B have been adjusted. These modifications were discussed during our recent class and are clearly indicated in red within the PDF of the project, which I have just uploaded to our Blackboard. Please make sure to review these changes before continuing with your project to ensure that your work aligns with the updated requirements. To help you verify your answer for your final project, here are the values you should find for each Present Worth and Internal Rate of Return: Option A: - The present worth for Option A is $767,945,850.53. - The internal rate of return (IRR) for Option A is 25.21%. Option B: - The present worth for Option B is $431,093,716.03. - The IRR for Option B is 28.32%. Question 2-Draw the cash flow diagram associated to each option. Question 3 - Assuming an interest rate of 3% per year (effective), calculate the feasibility of each option. You can use either Present Worth Analysis or Equivalent Uniform Worth Analysis. In this part, your calculation should be done without the use of Excel. Show your equations and the results