A. A hospital is a non-tax paying entity who is adding a new wing for pediatrics. Compute the NPV and IRR to determine feasibility of the project. How do I compute this? Data below.
B. This same hospital is now a tax-paying entity with a tax rate of 30%. Compute the NPV and IRR to determine the feasibility of the project. How do I compute this? Data below.
Data:
revenues each year for the next 5 years is $5,000,000 annually
operating expenses excluding depreciation each year for 5 years is $3,000,000 annually
initial investment $7,000,000
straight line depreciation over 5 years to a salvage value of $800,000
Cost of capital is 10%