Question
Trinity hospital evaluated an extension to its main building to house an MRI machine. The building and equipment are expected to cost $10 million. The
Trinity hospital evaluated an extension to its main building to house an MRI machine. The building and equipment are expected to cost $10 million. The machine is expected to run 20 procedure per day at $1,000 net patient revenue per procedure. The salvage value of the building and equipment is $5 million. The NPV is positive. As a follow up, Trinity Hospital did a sensitivity analysis on number of procedures, average revenue per procedure, and the equipment salvage value. The results follow:
Number of Procedures | Avg Revenue per Procedure | Building & Equipment Salvage Value | |
-30% | (2,006,852) | (2,727,320) | $316,191 |
-20% | (1,046,228) | (1,526,540) | 502,467 |
-10% | (85,604) | (325,760) | 688,744 |
0% | 875,020 | 875,020 | 875,020 |
10% | 1,835,644 | 2,075,800 | 1,061,296 |
20% | 2,796,268 | 3,276,580 | 1,247,573 |
30% | 3,756,892 | 4,477,360 | 1,433,849 |
According to the analysis, which of the following is closest to the breakeven revenue per procedure?
A)$1,100
B) There is no breakeven revenue per procedure.
C) -$300,000
D)$300,000
E) $700
F) $85,050
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started