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Question - The PHA Medical Center is planning to purchase MRI and CT for its new imaging center. The MRI and CT is expected to generate $3,000,000 per year in revenues for the next five years. The MRI and CT will incur operating expenses, excluding depreciation, of $1,200,000 per year for the next five years. The initial capital investment outlay for the equipment is $5,500,000, which will be depreciated on a straight-line basis to its salvage value of $800,000 at year five. The cost of capital for this project is 12%.
Required -
1. Compute the Depreciation Expense and NPV
2. Compute the Internal Rate of Return (IRR).
3. Based on the NPV and IRR results, should this project be accepted or rejected? Assume the required rate of return is 13%. Explain.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Create a cost-benefit analysis to evaluate the project
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Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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