Healthcare Finance
For this assignment, you are considering the purchase of a new MRI machine for Bayside Memorial Hospital. Think about what types of patients you will see, what types of care you will provide, and the team members you have assembled. Remember, the financial analysis provides much of the guidelines for all decision making in the purchase decision. Using the chart of cash revenues and costs, read and understand the cash flow analysis results. Then provide your decision on whether to make the purchase or not. You frame this recommendation as a pitch to your boss, the CEO of the organization. Be persuasive, providing solid evidence for your conclusion on whether to purchase the equipment or not.
Cash Revenues and Costs:
0 1 2 3 4 5
System cost ($2,000,000)
Installation expenses (500,000)
Total Cost ($2,500,000)
Net revenues $750,000 $787,500 $826,875 $868,219 $911,630
Labor costs (60,000) (63,000) (66,150) (69,457) (72,930)
Maintenance cost (150,000) (157,000) (165, 375) (173,644) (182,326)
Supplies (30,000) (31,500) (33,075) (34,729) (36,465)
Net operating income $510,000 $535,500 $562,275 $590,389 $619,908
Salvage value 750,000
Net cash flow ($2,500,000) $510,000 $535,500 $562,275 $590,389 $1,369,908
Profitability Measures:
Net present value: $82,493
Internal rate of return = 11.1%
