Calculate the net present value of costs

Assignment Help Financial Accounting

Reference no: EM13135594

A hospital has to evaluate a budget request for a new boiler room. The hospital's engineer has stated that if he does not have a boiler room, then three additional maintenance men should have to be hired to maintain the present room for two shifts per day and the week ends. The average salary for a maintenance man is $750.00 per month. Presently, the maintenance and parts of the boiler cost $1,000.00 per month. A new boiler room with a new boiler is expected to cost $500,000.00 Its maintenance costs are expected to be $500.00 per month. The depreciable life of the new boiler is 20 years. The engineer estimates that at the longest, the present boiler would last 5 more years even with additional maintenance and would cost $550,000.00 to replace in 5 years. The old boiler still has $41,650.00 to be depreciated. If the new boiler is to be purchased, it will be purchased with cash.

Required: Using the information above, calculate the net present value of costs (cash outflows) and decide whether it should be purchased in the budget year. Assume a 10 per cent cost of capital (discount rate).

Reference no: EM13135594

Questions Cloud

What is the price if a markup of total cost : A company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?

Prepare the correcting je that you would propose : On February 1, 2010, Katz corp. purchased a small lot and unusable building for $12,000, including back taxes of $1,000. On March 1, 2010, the lot was cleared, paved, and fenced to provide additional parking for employees.

Workplace difficulties of women : Develop a presentation or information paper to other managers regarding the experience of women in the workplace. The document may be in memo, PowerPoint or paper form. There is no word count requirement. Just requesting an outline for this docume..

Calculate the ph : A buffer is 0.282 M C6H5COOH (aq) and 0.282 M NA(C6H5COO)(aq). Calculate the pH after the addition of 0.150 moles of nitric acid to 1.0 L of the buffer.

Calculate the net present value of costs : Using the information above, calculate the net present value of costs (cash outflows) and decide whether it should be purchased in the budget year. Assume a 10 per cent cost of capital (discount rate).

How accounts receivables and cash go together : how accounts receivables and cash go together. Beyond just cash showing when funds are collected how is the timing of receivables different than the timing of cash and how can the company make sure they are on top of collecting the funds due them.

Development for adults in multicultural environments : When designing and conducting training for adults in a multinational or multicultural environment, why is it important to know adult learning theories and principles? What do trainers need to know about how adults learn

Statement of comprehensive income for the year : Statement of comprehensive income for the year ended 31 December 2012 and statement of financial position as at 31 December 201

Assignment : marketing models : Assignment : Marketing Models,Develop an argument regarding the significance of marketing to organizational success in the 21st century.

User Account

All Pages