For this assignment, you are considering the purchase of a new MRI machine for Bayside Memorial Hospital. Think about what types of patients you will see, what types of care you will provide, and the team members you have assembled. Remember, the financial analysis provides much of the guidelines for all decision making in the purchase decision. Your goal will be to provide a 2-minute elevator pitch of your recommendation
to the organization’s CEO and to persuade them toward your point of view.
Instructions
Using the chart of cash revenues and costs, read and understand the cash flow analysis results. Then provide your decision on whether to make
the purchase or not. You will frame this recommendation in a 2-minute pitch to your boss, the CEO of the organization. Record your 2-minute
pitch as an audio recording and be persuasive, providing solid evidence for your conclusion on whether to purchase the equipment or not.
Cash Revenues and Costs:
0 1 2 3 4 5
1. System cost ($2,000,000)
2. Installation
expenses (500,000)
3. Total Cost ($2,500,000)
4. Net
revenues $750,000 $787,500 $826,875 $868,219 $911,630
5. Labor costs (60,000) (63,000) (66,150) (69,457) (72,930)
6. Maintenance
cost (150,000) (157,000) (165, 375) (173,644) (182,326)
7. Supplies (30,000) (31,500) (33,075) (34,729) (36,465)
8. Net
operating
income
$510,000 $535,500 $562,275 $590,389 $619,908
9. Salvage
value 750,000
10. Net cash
flow ($2,500,000)$510,000 $535,500 $562,275 $590,389 $1,369,908
Profitability Measures:
Net present value: $82,493
Internal rate of return = 11.1%