1. Complete Table 1 by adding the cash flows for Years 4 and 5.
2. What is the project's payback, NPV, and IRR? Interpret each of these measures
3. Suppose that the project would be allocated $10,000 of existing overhead costs, should these costs be included in the cash flow analysis? Explain
4. It is likely that many of the procedures at athe outpatient surgery center would have otherwise been performed at the hospital's inpatient surgery unit. How should the analysis incorporate the cannibalization of inpatient surgeries? Would the handling of cannibalization change if yhou believed that the local physicians werre gong to open an outpatiewnt surgery center of thier own? (Only discuss the issues here -- no numbers required).
5. Conduct a scenario analysis. What is its expected NPV? What is the worst and best case NPV? How does the worst case value help in assessing the hospital's ability to bear the risk of this investment?
6. Now assume that the project is judged to have high risk. Furthermore, the hospital's standard procedure is to use a 3 % point risk adjustement, What is the project's NPV after adjusting for assessment of high risk?
7. What is yor finan recommendation regarding the proposed outpatient surgery center?