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Alameda Hospital is expecting its new cancer center to generate the following cash flows: Givens Years 0 1 2 3 4 5 Initial investment   ($30,000,000)           Net operating cash flows     $6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000                                   Determine the payback for the new cancer center in years. Determine the net present value (NPV) using a cost of capital of 15%. Determine the NPV at a cost of capital of 20%.

Alameda Hospital is expecting its new cancer center to generate the following cash flows: Givens Years 0 1 2 3 4 5 Initial investment   ($30,000,000)           Net operating cash flows     $6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000                                   Determine the payback for the new cancer center in years. Determine the net present value (NPV) using a cost of capital of 15%. Determine the NPV at a cost of capital of 20%.

Cornerstones of Cost Management (Cornerstones Series)
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 2CE
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Alameda Hospital is expecting its new cancer center to generate the following cash flows:

Givens Years 0 1 2 3 4 5
Initial investment   ($30,000,000)          
Net operating cash flows     $6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000
               
               

 

  1. Determine the payback for the new cancer center in years.
  2. Determine the net present value (NPV) using a cost of capital of 15%.
  3. Determine the NPV at a cost of capital of 20%.
  4. Determine the internal rate of return (IRR) using a cost of capital of 20%.
  5. Should the project be accepted at a cost of capital of 15%? 
  6. Should the project be accepted at a cost of capital of 20%?
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