Question: Spring Valley hospital's board of directors has approved of purchasing of a CT scanner with a capital investment of $300,000. The estimated life of the CT scanner is 10 and during that period the estimated after-tax cash flows (EATCF) are given below. The investments required rate of return is 15%.
|
Year
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
100
|
|
EATCF
($1000)
|
-$300
|
$50
|
$55
|
$60
|
$60
|
$65
|
$65
|
$70
|
$70
|
$75
|
$75
|
Evaluate this investment, in terms of:
a) Average rate of Return
b) Net Present Value
c) Profitability index