Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help Required information PR 16-43 (Static) Net-Present-Value Analysis; Hospital (Section 1) (LO 16-1, 16-3) The following information applies to the questions displayed below] Allegheny

please help
image text in transcribed
image text in transcribed
Required information PR 16-43 (Static) Net-Present-Value Analysis; Hospital (Section 1) (LO 16-1, 16-3) The following information applies to the questions displayed below] Allegheny Community Hospital is a nonprofit hospital operated by the county. The hospital's administrator is considering a proposal to open a new outpatient clinic in the nearby city of New Castle. The administrator has made the following estimates pertinent to the proposal. 1. Construction of the clinic building will cost $780,000 in two equal installments of $390,000, to be paid at the end of 200 and 201. The clinic will open on January 2,202. Al staffing and operating costs begin in 202. 2. Equipment for the clinic will cost $150,000, to be paid in December of 201. 3. Staffing of the clinic will cost $800,000 per year. 4. Other operating costs at the clinic will be $200,000 per year. 5. Opening the clinic is expected to increase charitable contributions to the hospital by $250,000 per year, 6. The clinic is expected to reduce costs at Allegheny Community Hospital. Annual cost savings at the hospital are projected to be $1,000,000. 7. A majot refurbishment of the clinic is expected to be necessary toward the end of 205. This work will cost $180,000 8. Due to shifing medical needs in the county, the administrator doubts the clinic will be needed after 209. 9. The clinic building and equipment could be sold for $290,000 at the end of 209. 10. The hospital's hurdle rate is 12 percent. Use Appendix A for your reference. Note: Use appropriate factor(s) from the tables provided. PR 16-43 (Static) Part 1 Compute the cash flows for each year relevant to the analysis. Required: 1-3. Fill in the following table to compute the net present value of the proposed outpatient clinic 4. Should the administrator recommend to the hospital's trustees that the clinic be buit? Fil in the following table to compute the net present value of the proposed outpatient clinie Note: Round your "Discount factors" to 3 decimal places. Negative amounts should be indicated by a minus sign

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting and Reporting

Authors: Barry Elliott, Jamie Elliott

14th Edition

978-0273744535, 273744445, 273744534, 978-0273744443

Students also viewed these Accounting questions