You are the Executive Director of a large research institute that is evaluating whether to invest in a newmedical imaging equipment (machine) that combines molecular imaging with magnetic resonanceimaging. There is considerable interest from your clinicians and research community on the potential for thismachine. Notably, you would be the first in the country to have purchased and deployed such equipment inCanada should you decide to pursue this opportunity. Further, the existing old equipment that waspurchased 5-years ago for $3,000,000 is due for replacement anyway. The institutes Chief Financial Officer has requested that you present a financial model as the executive teamis set to make a final decision next month. Below is the information that is provided to you to utilize in creating your financial model and arecommendation to the executive team on their final decision. Initial Capital Project: $7,000,000 machine $2,000,000 facility construction Projected Revenues for 5-Years Post-Implementation:

The market rate for this type of machine usage is $1,000 per unit. Rates presented below adjust for a 2%year-over-year increase to account for expected inflation. All amounts are rounded to the nearest dollar. The scenarios are based on likelihood.

Expected Operating Expenses: Variable rates presented below are per unit and include all applicable taxes, extra fees, benefits for salaries.Do not adjust for inflation. Equipment Technologist Salary Per Unit (Direct Labour) = $106/unit Consumables Per Unit (Direct Materials) = $50/unit

Annual fixed costs presented below are for the operations of the whole facility and include all applicabletaxes, extra fees, benefits for salaries. Do not adjust for inflation. Service Contract for Machine Per Year = $200,000 Supervisor Salary = $85,000 Rent & Facility Fees = $55,000

Other Information: There are no financing costs related to this project. The discount rate employed by the institution is 8%.

Now, based on the images below that shows some of the workings:

Answer these questions: 1. What is your final decision solely based on the financial model & why? (15) 2. Write up a maximum one-page briefing note on your final decision, the financial implications, andany other information from your analysis that the executive team you believe may find important.

Sronarin A. Connarin D. Conmerion \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline & A & & B & C & & D & E & F & G & H & 1 & J & K \\ \hline 1 & \multicolumn{3}{|c|}{ Initial Capital Project } & \multicolumn{3}{|c|}{ Discount Rate } & 8% & & & & & & \\ \hline 2 & Machine & $ & 7,000,000 & & & & & & & & & & \\ \hline 3 & Facility Construction & $ & 2,000,000 & & & & & & & & & & \\ \hline 4 & Total Initial Investment & $ & 9,000,000 & & & & & & & & & & \\ \hline 5 & & & & & & & & & & & & & \\ \hline 6 & Year & & Rate & Quantity A & & venue A & Quantity B & Revenue B & Quantity C & Revenue C & UCM Per Year & Contribution Margin & Q Breakeven \\ \hline 7 & 1 & $ & 1,000 & 20 & $ & 20,000 & 100 & $100,000 & 400 & $400,000 & 844 & 84% & 403 \\ \hline 8 & 2 & $ & 1,020 & 100 & $ & 102,000 & 300 & $306,000 & 700 & $714,000 & 864 & 85% & 394 \\ \hline 9 & 3 & $ & 1,040 & 200 & $ & 208,000 & 500 & $520,000 & 800 & $832,000 & 884 & 85% & 385 \\ \hline 10 & 4 & $ & 1,061 & 250 & $ & 265,250 & 550 & $583,550 & 900 & $954,900 & 905 & 85% & 376 \\ \hline 11 & 5 & $ & 1,082 & 300 & $ & 324,600 & 600 & $649,200 & 1000 & $1,082,000 & 926 & 86% & 367 \\ \hline 12 & Tot: & R & venues & & $ & 919,850 & & $2,158,750 & & $3,982,900 & & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{10}{|c|}{13} \\ \hline 14 & \multicolumn{7}{|c|}{ P\&L for Scenario A } & \multicolumn{2}{|c|}{ NPV Scenario A } \\ \hline 15 & Year & \multicolumn{2}{|c|}{ Revenue } & \multicolumn{2}{|c|}{ Variable Costs } & Fixed Costs & Net Profit (Loss) & & (9,000,000) \\ \hline 16 & 1 & $ & 20,000 & $ & 3,120 & $340,000 & (323,120) & $ & (323,120) \\ \hline 17 & 2 & $ & 102,000 & $ & 15,600 & $340,000 & (253,600) & $ & (253,600) \\ \hline 18 & 3 & $ & 208,000 & $ & 31,200 & $340,000 & (163,200) & $ & (163,200) \\ \hline 19 & 4 & $ & 265,250 & $ & 39,000 & $340,000 & (113,750) & $ & (113,750) \\ \hline 20 & 5 & $ & 324,600 & $ & 46,800 & $340,000 & (62,200) & $ & (62,200) \\ \hline \multicolumn{10}{|l|}{21} \\ \hline 22 & \multicolumn{7}{|c|}{ P\&L for Scenario B } & \multicolumn{2}{|c|}{ NPV Scenario B } \\ \hline 23 & Year & \multicolumn{2}{|r|}{ Revenue } & \multicolumn{2}{|c|}{ Variable Costs } & Fixed Costs & Net Profit (Loss) & $ & (9,000,000) \\ \hline 24 & 1 & $ & 100,000 & $ & 15,600 & $340,000 & (255,600) & $ & (255,600) \\ \hline 25 & 2 & $ & 306,000 & $ & 46,800 & $340,000 & (80,800) & $ & (80,800) \\ \hline 26 & 3 & $ & 520,000 & $ & 78,000 & $340,000 & 102,000 & $ & 102,000 \\ \hline 27 & 4 & $ & 583,550 & $ & 85,800 & $340,000 & 157,750 & $ & 157,750 \\ \hline 28 & 5 & $ & 649,200 & $ & 93,600 & $340,000 & 215,600 & $ & 215,600 \\ \hline \multicolumn{10}{|l|}{29} \\ \hline 30 & \multicolumn{7}{|c|}{ P\&L for Scenario C } & \multicolumn{2}{|c|}{ NPV Scenario C } \\ \hline 31 & Year & \multicolumn{2}{|r|}{ Revenue } & \multicolumn{2}{|c|}{\begin{tabular}{|l|} Variable Costs \\ \end{tabular}} & Fixed Costs & Net Profit (Loss) & \begin{tabular}{|l|l|} $ \\ \end{tabular} & (9,000,000) \\ \hline 32 & 1 & $ & 400,000 & $ & 62,400 & $340,000 & (2,400) & $ & (2,400) \\ \hline 33 & 2 & $ & 714,000 & $ & 109,200 & $340,000 & 264,800 & $ & 264,800 \\ \hline 34 & 3 & $ & 832,000 & $ & 124,800 & $340,000 & 367,200 & $ & 367,200 \\ \hline 35 & 4 & $ & 954,900 & $ & 140,400 & $340,000 & 474,500 & $ & 474,500 \\ \hline 36 & 5 & $ & 1,082,000 & $ & 156,000 & $340,000 & 586,000 & $ & 586,000 \\ \hline 37 & & & & & & & & & \\ \hline \end{tabular}