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St. Joseph Medical Center is considering purchasing an ultrasound machine for $1,170,000. The machine has a 10-year life and an estimated salvage value of $30,000.
St. Joseph Medical Center is considering purchasing an ultrasound machine for $1,170,000. The machine has a 10-year life and an estimated salvage value of $30,000. The center uses straight-line depreciation. St. Joseph's cost of capital is 9%. > The medical center estimates that the machine will be used five times a week with the average charge to the patient for ultrasound of $775. There are $5 in medical supplies and $20 of technician costs for each procedure performed using the machine. The present value of an annuity factor for 10 years at 9% is 6.41766, and the present value of a single sum factor for 10 years at 9% is .42241 > QUESTIONS: 1. For the new ultrasound machine, compute the: > (a) cash payback period. (b) net present value. (c) annual rate of return. > 2. Should the Center purchase this new ultrasound machine? Explain your answer fully
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