Question

In: Accounting

The non-profit University Hospital is contemplating purchasing a new blood gas machine at a cost of...

The non-profit University Hospital is contemplating purchasing a new blood gas machine at a cost of $1,500,000. Useful life of this machine is 10 years. The hospital currently serves 5,000 patients per year, 40 percent of whom need blood gas analysis data as part of the diagnostic tests. The blood samples are presently sent to a private laboratory that charges $150 per sample. In-house variable expenses are estimated to be $85 per sample if the hospital purchases the analysis machine. Required: Round your answers up, to the nearest whole number

. 1. Determine the indifference point (expressed in number of tests per year) between purchasing the machine and using the private laboratory.

2. Determine how many additional patients would be needed so that the hospital would be indifferent between purchasing the analysis machine and paying the $150 lab charge.

3. Determine the amount of the private laboratory charge so that the hospital would be indifferent as to purchasing the machine or using the private laboratory, assuming the current service level of 5,000 patients per year.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

General Hospital's CDSC is contemplating purchasing a blood gases analysis machine at a cost of $960,000....
General Hospital's CDSC is contemplating purchasing a blood gases analysis machine at a cost of $960,000. Useful like is 10 years. The screening center currently serves 3,000 patients per year, 40% who need blood analysis data as part of their diagnosis tests. The blood samples are presently sent to a private laboratory that charges $200 per sample. In-house variable expenses are estimated to be $125 per sample if the CDSC purchases the analysis machine. Use the Goal Seek function in...
Pooh Industries is contemplating purchasing a new machine that will significantly improve the efficiency of their...
Pooh Industries is contemplating purchasing a new machine that will significantly improve the efficiency of their operations. To date the company has spent $15,000 evaluating the machine to better determine annual operating savings from using the machine. The new machine would cost $800,000 and would be depreciated over an expected life of 8 years to a $40,000 salvage value using the straight-line method. Pooh forecasts that the new machine would reduce operating expenses by $200,000 per year. The firm's marginal...
Pooh Industries is contemplating purchasing a new machine that will significantly improve the efficiency of their...
Pooh Industries is contemplating purchasing a new machine that will significantly improve the efficiency of their operations. To date the company has spent $15,000 evaluating the machine to better determine annual operating savings from using the machine. The new machine would cost $800,000 and would be depreciated over an expected life of 8 years to a $40,000 salvage value using the straight-line method. Pooh forecasts that the new machine would reduce operating expenses by $200,000 per year. The firm's marginal...
ABC is looking at purchasing a new machine. The new machine installed cost is $60,000 and...
ABC is looking at purchasing a new machine. The new machine installed cost is $60,000 and requires minimal increase in NWC (net working capital). It will be sold at the end of year 3 for an anticipated $5,000. Use MACRS 3 yr. (Remember to add the terminal cash flow in when calculating year 3 OCF) Anticipated cash savings prior to depreciation: Year 1$20,000, Year 2 $30,000, Year 3 $20,000 Calculate the operating cash flows for each year. Tax Rate is...
123 Inc. is considering purchasing a new machine. The machine will cost $3,250,000. The machine will...
123 Inc. is considering purchasing a new machine. The machine will cost $3,250,000. The machine will be used for a project that lasts 3 years. The expected salvage of the machine at the end of the project is $800,000. The machine will be used to produce widgets. The marketing department has forecasted that the company will be able to sell 280,000 widgets per year. The marketing department believes that the company will be able to charge $22 per widget. The...
King’s Department Store is contemplating the purchase of a new machine at a cost of $35,370....
King’s Department Store is contemplating the purchase of a new machine at a cost of $35,370. The machine will provide $5,200 per year in cash flow for nine years. King’s has a cost of capital of 11 percent. Use Appendix D for an approximate answer but calculate your final answer using the financial calculator method. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
A company is considering purchasing a new machine that would cost $60,000 and the machine would...
A company is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its four year life. At the end of four years it is believed that the machine could be sold for $12,000. The machine would increase EBDT by $42,000 annually. the company's marginal tax rate is 34%. What the RATFCF’s associated with the purchase of this machine? $31,800 $32,820 $30,452 $29,940
DEF Corporation is considering purchasing a new production machine at a cost of $10,000,000. The machine...
DEF Corporation is considering purchasing a new production machine at a cost of $10,000,000. The machine is 7-year MACRS property. The corporate tax rate is a flat 21%, and the applicable discount rate is 6%. a. Compute the after-tax cost of the machine to DEF. b. Compute the after-tax cost of the machine to DEF, assuming that the machine qualifies for immediate expensing. c. Comment. MACRS percentages for depreciation each year are as follows: Year % 1 14.29 2 24.49...
The BoomBoom Chemical Company is considering purchasing a new production machine. The machine has a cost...
The BoomBoom Chemical Company is considering purchasing a new production machine. The machine has a cost of $250,000 and would cost an additional $10,000 after-tax to install. If purchases, the machine will increase earnings before interest and tax by $70,000 per annum. To operate effectively, raw material inventory would need to be increased by $10,000. The machine has an expected life of 10 years and no salvage value. It will be depreciated straight line (prime cost) over its 10 year...
Calexico Hospital plans to invest in a new MRI machine. The cost of the MRI is...
Calexico Hospital plans to invest in a new MRI machine. The cost of the MRI is $1.4 million. The MRI has an economic life of 5 years, and it will be depreciated over a five-year life to a $200,000 salvage value. Additional revenues attributed to the new MRI will be in the amount of $1.5 million per year for 5 years. Additional operating expenses, excluding depreciation expense, will amount to $1 million per year for 5 years. Over the life...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT