Marshall healthcare system, a not-for-profit hospital, is planning on opening an imaging center including MRI, x-ray, ultrasound, and CT. The new center will generate $4 million per year in revenues for 5 years. Expected operating expenses, excluding depreciation, would increase expenses by $1.2 million per year for the next 5 years. The initial capital investment outlay for the project is $5.5 million, which will be depreciated on a straight line basis to a savage value. The savage value in years 5 is $800,000. The cost of capital for this project is 12%. a. Compute the NPV in the IRR to determine the financial feasibility of the project.
4 million per year in revenue - depreciaton a t 1.2 million do I subtract this, and what do I do with the savage value?