NPV Versus Internal Rate of ReturnKeating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows:Clearlook GoodviewAnnual$720,000 $900,000revenuesAnnualoperating445,000655,000costsSystem900,000800,000investmentProject life 5 years5 yearsAssume that the cost of capital for the company is 8 percent.The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.Required:1. Calculate the NPV for the Clearlook System.2. Calculate the NPV for the Goodview System.Which MRI system would be chosen?3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round the IRR to the nearest whole percentage value (for example, 10.6%rounds to 11% and should be entered as "11" in the answer box.)Discount factorIRRClearlook:%Goodview:Why IRR is not suitable for choosing among these mutually exclusive investments.

Answered: Image /qna-images/answer/9d2bac1e-6af0-4f6e-9377-1368f62bd477.jpg

Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate rounds to 11% and should be entered as "11" in the answer box.) Discount factor IRR Clearlook: Goodview:

Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate rounds to 11% and should be entered as "11" in the answer box.) Discount factor IRR Clearlook: Goodview:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 5CE: Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the...

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PV Versus Internal Rate of Return Nguyen Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual revenues $720,000   $900,000   Annual operating costs 445,000 655,000 System investment 900,000 800,000 Project life 5 years 5 years Assume that the cost of capital for the company is 8 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Calculate the NPV for the Clearlook System - $198075 2. Calculate the NPV for the Goodview System - $178285 Which MRI system would be chosen -Clearlook System 3. What if Nguyen Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round…
Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual revenues $720,000 $900,000   Annual operating costs 445,000 655,000 System investment 900,000 800,000 Project life 5 years 5 years Assume that the cost of capital for the company is 8%. Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project and explain why it is not suitable for choosing among…
Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual revenues $720,000   $900,000   Annual operating costs 445,000 655,000 System investment 900,000 800,000 Project life 5 years 5 years Assume that the cost of capital for the company is 8 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: Calculate the NPV for the Clearlook System.$ Calculate the NPV for the Goodview System.$ Which MRI system would be chosen? Clearlook System Goodview System3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round the IRR…
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