We are investigating the purchase of a new mobile primary care van to use in screening residents in an under-served Central Florida areas. The van will last for 5 years and costs $68,000. We will 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 us $15 for each patient it screens using the new van. We 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. We use a discount rate of 5 percent.
•How much will we need in foundation grants this year to make the purchase break-even financially?
(Hint: 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? Are the payments from the county sufficient? If not, how much must be raised in grants before the van is purchased?)