St. Elsewhere Hospital is considering two alternatives and analyzing their consequences over a 3-year period on...

St. Elsewhere Hospital is considering two alternatives and analyzing their consequences over a 3-year period on the hospital budget.

Alternative A 5 Hire a pharmacist

Alternative B 5 Buy an automated drug delivery system machine

Alternative A’s costs are $80,000 salary plus 20% for fringe benefits per year for the next 3 years.

Alternative A’s savings are $120,000 per year for the next 3 years.

Alternative B’s costs for the automated system are $200,000 for the first year, $30,000 for the second year, and $30,000 for the third year.

Alternative B’s savings are $100,000 per year for each of the 3 years. Assuming a 5% discount rate, calculate:

1. The net benefit of hiring a pharmacist

2. The net benefit of the automated system

3. The benefit-to-cost ratio for hiring a pharmacist

4. The benefit-to-cost ratio for the automated system

Expert Solution

Rahul Sunny answered 2 years ago

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