Question - A new cardiac catheterization lab was constructed at Have a Heart Hospital. The investment in this lab was $950,000 in equipment costs and $50,000 in renovation costs. A desired return on investment is 12 percent. Once the lab was operating, 7,000 patients were served in the first year and were charged $640 for each procedure. The annual fixed cost for the catheterization lab is $2million, and the variable cost is $329 per procedure. What was the catheterization lab's profit? Did this profit meet its desired ROI?
a. Determine the payback for the new dialysis unit.
b. Determine the NPV using a cost capital of 15 percent.
c. Determine the NPV at a cost of capital of 20 percent and compute the IRR.
d. At a 15 percent cost of capital, should the project be accepted? At a 20 percent cost of capital, should the project be accepted? Explain.