Question
The director of capital budgeting for Big Sky Health Systems, Inc., has estimated the following cash flows in thousands of dollars for a proposed new
The director of capital budgeting for Big Sky Health Systems, Inc., has estimated the following cash flows in thousands of dollars for a proposed new service: Year Expected Net Cash Flow 0 ($100) 1 70 2 50 3 20 The projects cost of capital is 10 percent.
Is the new service financially viable? What recommendations would you make to the board regarding this service? Would the recommendation be the same if there was an opportunity cost involved of $15,000 (total) in todays dollars obtained by renting the space involved in the new service to an outside entity for 3 years? Why or why not?
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