Finance Homework Help

timer Asked: Feb 15th, 2016

Question description

In this assignment will require you to calculate Future Values (FV), Present Values (PV), Net Present Values (NPV) and Internal Rates of Return (IRR). How much is the charge and can you complete by 2/17/16 at 4pm.?

  1. You win a lawsuit and are offered two options to receive your money. The first option is to receive $5,000 a year for the next 5 years starting today. The second option is to receive $28,000 4 years from today. Assume a 7% discount rate. Calculate the PV of each alternative. Which option would you select? Why? (Hint: In the PV formula enter the amount in the PMT field when you have multiple payments, use the FV field when you have a single payment).

  2. Center Line Lab owns a laboratory analyzer that uses expenses supplies. You find you can purchase a new machine that performs the same lab tests but saves you $5,000 a month on supplies. The new machine costs $$210,000. What is the payback period in years?

  3. You have decided you want to get into the healthcare business. Imaging services is a growing area so you find that you can purchase a used MRI for $1,000,000. Since the machine is used it has a remaining useful life of 3 years.

    In researching this investment you have determined the following:

  • Insurance will pay $1,200 for an MRI procedure

  • In year one you expect to be able to do 600 procedures. In years 2 and 3 you expect to be able to increase the number of procedures by 10% each year through marketing of your MRI.

  • Marketing cost will be $5,000 per year.

  • Insurance payment rates are expected to increase 2% a year.

  • Supplies are $170 per procedure and expected inflation on supplies is 4%

  • Your need to pay staff to operate the MRI $200,000 in year one. Plan to give your employees a 3% raise annually. The staffing will not vary due to changes in volume. 

  • You lease space in a medical office building at a cost of $15,000 per year. The cost of the lease if fixed for three years.

  • Due to your expectation that this is a risky investment you use an 18% discount rate.

Calculate the NPV and IRR. Should this investment be made? Why or why not? (10 points)

  1. Shady Acres, a non-profit long-term care facility is considering purchasing new laundry equipment to clean the resident’s clothes. The following facts are known:

  • The cost of the equipment is $50,000

  • Installation of the equipment is $5,000

  • The old equipment cost $4,000 annually to maintain

  • The new equipment is under a free warranty for one year. Starting in year two the cost is $2,500 annually to maintain

  • The old equipment used $10,000 of detergent annually

  • The new equipment uses $14,000 of detergent annually

  • The new machine is energy and water efficient. As a result, the new machine will save $7,000 a year on utilities

  • No inflation is expected on any of the costs

    • Shady Acres uses a 8% discount rate

    • The equipment has a 15 year life

  Calculate the Payback period, NPV and IRR. Should Shady acres purchase the laundry equipment?

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