Answered: Net Present Value and Internal Rate of…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4PB

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Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for a new clinical nurse specialist program being established by your healthcare organization. The nurses would provide education while patients are in the hospital and home visits are on a fee-for-service basis after patients have been discharged

Should the hospital undertake the program if its required rate of return is 12%?

Note: it must be assumed that the revenues and costs in this problem represent cash flows. Present value analysis is based on cash, not revenue or expenses. Provide a response to support the findings in the table listed below. Your response should be at least a half page long in addition to the table. Please include citations.

	Year One	Year Two	Year Three	Year Four	Total
Revenue	$100,000	$150,000	$200,000	$250,000	$700,000
Costs	$150,000	$150,000	$150,000	$150,000	$600,000
	$ <50,000>	$0	$50,000	$100,000	$100,000

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