Question

1. Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for a new clinical nurse specialist program being established by your healthcare organization. The nurses would provide education while patients are in the hospital and home visits are on a fee-for-service basis after patients have been discharged

Should the hospital undertake the program if its required rate of return is 12%?

Note: it must be assumed that the revenues and costs in this problem represent cash flows. Present value analysis is based on cash, not revenue or expenses. Provide a response to support the findings in the table listed below. Your response should be at least a half page long in addition to the table. Please include citations.

	Year One	Year Two	Year Three	Year Four	Total
Revenue	$100,000	$150,000	$200,000	$250,000	$700,000
Costs	$150,000	$150,000	$150,000	$150,000	$600,000
	$ <50,000>	$0	$50,000	$100,000	$100,000

Answer 1

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			Year 1	Year 2	Year 3	Year 4	Total
	Revenue	Cash Inflow	$100,000	$150,000	$200,000	$250,000	$700,000
	Costs	Cash Outflow	$150,000	$150,000	$150,000	$150,000	$600,000
	Profits	Net Cashinflow	($50,000)	$0	$50,000	$100,000	$100,000
		Required Rate of Return	12%
	Above table shows total net benefit of Rs 100000. But we need to have Net present value of this to determine
	what is our exact present value inflows to decide better.
	At 12%
			Year 1	Year 2	Year 3	Year 4	Total
	NPV	Net Cashinflow	($44,642.86)	$0	$35,589.01	$63,551.81	$54,497.96
	Above we can see that actual profit for net inflows is $ 54497.96 instead of $ 100000
	if we calculate in present value terms. However as same is higher than our required
	rate of return @ 12% , we can accept this as we will be having positive return only.
	Always to decide whether any project to be done or not - NPV and Rate of return are 2
	major factors. If our NPV is positive and we are getting above our required rate of return
	then we take project in our favour as it will be profitable for us.