The Ward County Hospital Center wants to buy a new mobile rimary care van to use in screening residents in an underserved local neighborhood. The van will last for 5 years and costs $68,000. WCHC pay for the acquisition and maintenance of the van partially from foundation grants and partially from receipts from the county health department. The county has agreed to reimburse WCHC $15 for each patient it screens using the new van. They expect to serve 800 patients per year with the van. It will cost $3,000 per year to maintain the vehicle, and includes all relevant costs. WCHC uses a discount rate of 5 percent.
How much will WCHC need in foundation grants this year to make the purchase break-even financially?
Hint:
1. What is the net present value of the costs of buying and operating the van over its lifetime, less the payments that will be received from the county?
2. Are the payments from the county sufficient?
3. If not, how much must be raised in grants before the van is purchased?