# Accounting problem need help

Apr 9th, 2015
RockCafe
Category:
Accounting
Price: \$5 USD

Question description

The MRI Trailer costs \$600,000 and has an expected life of 5 years with an estimated salvage value of \$200,000 at that time.  After some extensive research, the numbers we have come up with look like this:

• 15 tests per day for 250 days per year for each year of the projects life
• Each procedure is expected to generate \$80 in cash collections during the first year of use (Net revenue for year 1 is 15*250*80=\$300,000)
• Labor and Maintenance costs are expected to be \$100,000 during the first year
• Utilities will cost \$10,000 in year one and there is an incremental overhead increase of \$5,000 beginning in year one
• Cost for expendable supplies is expected to be \$5 per procedure
• Costs and revenues are expected to increase at a 5% inflation rate
• Our corporate cost of capital is 10%

• estimate the project's net cash flow over the 5 year estimated life.  I want you to use the properties (formulas) in Excel here.
• determine the project's NPV and IRR (Use the excel formulas to determine this as well)
• Is this a project we should move forward with? (Consider NPV and strategic value here)---This can be written in text into your excel sheet.

(Top Tutor) Daniel C.
(997)
School: University of Virginia

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Apr 9th, 2015
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