Methods of Calculating Returns
An independent orthopedic clinic is considering expanding by opening a small surgery center instead of renting space in a local hospital. They ask their financial department (you) for methods of calculating whether or not they should consider the project. They are unfamiliar with the methods and just want an understanding of how they work.
Choose the capital investment decision method (Payback, Net Present Value, or Internal Rate of Return) that you think would work the best for this situation. How would you describe the method so that the doctors can understand the way it works? What outcome would they need to achieve in order to go ahead with the project?
Review the posts made by your classmates and reply to at least one that recommended a different method of calculating returns. What are the strengths of the method they chose? What are its weaknesses? After reading their rationale, would you change your approach?