Question
Suppose the Ontario Government is considering providing a community with a hospital which will cost $1B immediately to construct and $100M/year to operate (inclusive of
Suppose the Ontario Government is considering providing a community with a hospital which will cost $1B immediately to construct and $100M/year to operate (inclusive of all services provided therein). Assume that the hospital (inclusive of all equipment therein) depreciates at a rate of 3%/year, that the hospitals operating costs increase at a rate of 2%/year and that taxpayers have a discount rate of 7%/year. Use NPV to determine the minimum present value of the infinite stream of social benefits conferred by the hospital which would make the hospital socially desirable.
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