The shareholders of a private clinic are considering investing in the purchase of a smaller private clinic and have the amount of 10 million euros. There are two candidates for acquisition clinics: A and B, both of which meet - apart from financial - the shareholders' specifications. The following input-output data concerning private clinics A and B are presented in detail.

Private clinic A: Inputs Income from hospitalization in the first year concerns 5,000 hospitalized patients per year with an average income of 850 euros per patient. From the second to the fifth year there is an 8% increase in total revenue each year compared to the previous year.

Outflows Consumables and medicines in the first year amount to 20% of hospitalization revenue in the first year. From the second to the fifth year there is a 7% increase each year compared to the previous year.

Other expenses (eg taxes) amount to 15% of the annual total outflows from the first to the fifth year.

Wage of the staff 1) Nursing / Administrative staff: There are 40 nurses and administrators in the first year with an average monthly working cost of 1,400 (it also contains all insurance contributions) who receive 14 salaries annually. From the second to the fifth year, 3 nurses are added every next year and their salary remains constant.

2) Doctors: There are 20 doctors in the first year with an average monthly total salary of 2,800 (it also contains all insurance contributions) who receive 12 salaries with an invoice for the provision of services. From the second to the fifth year in the total cost of the doctors of the first year is added in the form of bonus and 5% of the total inputs of the previous year.

Private clinic B: Inputs Income from hospitalization in the first year concerns 3,000 hospitalized patients per year with an average income of 1250 euros per patient. From the second to the fifth year there is an 10% increase in total revenue each year compared to the previous year.

Outflows Consumables and medicines in the first year amount to 25% of hospitalization revenue in the first year. From the second to the fifth year there is a 5% increase each year compared to the previous year.

Other expenses (eg taxes) amount to 10% of the annual total outflows from the first to the fifth year.

Wage of the staff 1) Nursing / Administrative staff: There are 40 nurses and administrators in the first year with an average monthly working cost of 1,400 (it also contains all insurance contributions) who receive 14 salaries annually. From the second to the fifth year, 3 nurses are added every next year and their salary remains constant.

2) Doctors: There are 12 doctors in the first year with an average monthly total salary of 3,500 (it also contains all insurance contributions) who receive 12 salaries with an invoice for the provision of services. From the second to the fifth year in the total cost of the doctors of the first year is added in the form of bonus and 4% of the total inputs of the previous year.

a) The following are true for both clinics: Residual value in the 5th year: It is equal to four times the average of the net cash flows of 5 years. Prepayment rate: 5%. The Net Present Value method for a period of 5 years will be used to make the final decision on the two clinics from a financial point of view. Which of the two clinics should the acquisition be proposed for and why?

b) Based on the data of the previous sub-questionnaire for the private clinic that is finally selected, calculate the break even point of its 3rd year of operation in value and explain what this size means, taking into account the following data: Work cycle = Total input of the 3rd year Fixed costs = 45% of work cycle. Profit of exploitation = The net cash flows of the 3rd year.