1. The staff of ProHealth Medical Services has established the following net cash flows for a food services operation that may open in its outpatient clinic.

Year Expected Net Cash Flow

0 ($150,000)

1 40,000

2 40,000

3 40,000

4 40,000

5 40,000

5 (Salvage Value) 30,000

The time 0 cash flow is the net investment outlay, while the final amount is the terminal cash flow. The clinic is expected to move to a new building in five years. All other flows represent net operating cash flows ProHealth's corporate cost capital is 10%

1. What is the projects IRR?

1. Assuming the project has average risk, what, is its NPV?

1. Now, assume that the operating cash flows in years 1 through 5 could be as low as 20,000 or as high as $50,000. Furthermore, the salvage value cash flow at the end of year 5 could be as low as $0 or as high as $50,000.

1. What are the worst-case and best-case IRRS? The worst-case and best-case NPVs?

1.You have been asked to evaluate the proposed acquisition of a new portable MRI. The system's price is $70,000 and it will cost another $20,000 for transportation and installation the system is expected to be sold after three years because a new stationary machine will be acquired at that time the best estimate of the system salvage value after three years is $30,000 the system will have no impact on volume or reimbursement (and hence revenues) but it is expected to save $20,000 per year in operating costs the not for profit business corporate cost of capital is 10% and the standard risk adjustment is 4% points

a.What is the project's net investment outlay at time 0?

b.What are the projects operating cash flows in years 1, 2, and 3?

c.What is the terminal cash flow at the end of year 3?

d.If the project has average risk, it is expected to be profitable?