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Prob. 11-B2 Oncology department NPV

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NPV for investment decisions

The head of the Oncology department of FH Research Center is considering the purchase of some new equipment. The cost is $420,000, the economic life is 5 years, and there is no terminal disposal value. Annual cash inflows from operations would increase by $140,000 and the required rate of return is 14%. There are no taxes.

1. Compute the NPV
2. Should the research center acquire the equipment? Explain

Prob. 11-B2
 
The head of the Oncology department of FH Research Center is considering the purchase of some new equipment. The cost is $420,000, the economic life is 5 years, and there is no terminal disposal value. Annual cash inflows from operations would increase by $140,000 and the required rate of return is 14%. There are no taxes.
 
Compute the NPV
Should the research center acquire the equipment? Explain

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Solution Summary

Your tutorial is attached in Excel. I did it using the PV function, IRR function and using the charts.

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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