Capital Project Case Study
1. Determine the cash inflows and outflows for each year.
2. Evaluate the capital project by calculating the following metrics:
a. net present value (NPV)
b. internal rate of return (IRR)
c. modified internal rate of return (MIRR)
d. payback period
e. discounted payback period
3. Indicate whether the project is acceptable, assuming Jiranna has a corporate policy of not accepting projects that take more than 3.5 years to pay for themselves, and assuming an 11% cost of capital.
|
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
| Nurse Triage Salaries |
$ 523,800 |
$ 549,990 |
$ 577,490 |
$ 606,364 |
$ 636,682 |
$ 668,516 |
| Forecasted ER Cost Reductions |
$ 400,000 |
$ 800,000 |
$ 848,000 |
$ 900,577 |
$ 955,512 |
$ 1,013,798 |
| New IT Specialist's Salary |
$ 150,000 |
$ 154,500 |
$ 159,135 |
$ 163,909 |
$ 168,826 |
$ 173,891 |
| Costs of Facility Renovations |
$ 30,000 |
$ - |
$ - |
$ - |
$ - |
$ - |
| Necessary Capital Equipment Purchases |
$ 117,000 |
$ 3,510 |
$ 3,510 |
$ 3,510 |
$ 3,510 |
$ 3,510 |
| Net Cash Flow: |
|
|
|
|
|
|
| Present Values of Net Cash Flows: |
|
|
|
|
|
|
| Net Present Value: |
|
|
|
|
|
|
| IRR: |
|
|
|
|
|
|
| MIRR: |
|
|
|
|
|
|
| Payback Period (# years): |
|
|
|
|
|
|
| Discounted Payback Period (# years): |
|
|
|
|
|
|
|
|
|
|
|
|
|