Question

Newborn Hospital is considering the possibility of two new purchases, a new EKG/ECG machine or a new anesthesia machine. Each project would require an investment of $750,000. The expected life for each is five years with no expected salvage value. The net cash flows associated with the two independent projects are as follows.

a) Evaluate the cash flows and recommend the project with the highest NPV.
b) Calculate the payback period for each project.
c) Assess the return on investment for both projects.
d) Determine the internal rate of return for each project.

Answer 1

The question asks for an evaluation of two projects based on NPV, payback period, return on investment, and IRR, but unfortunately, the necessary cash flow data is not provided. Without that information, accurate calculations cannot be performed.

Step-by-step explanation:

The question provided requires a financial assessment of two potential projects for Newborn Hospital, evaluating based on Net Present Value (NPV), payback period, return on investment, and internal rate of return (IRR). However, the necessary cash flow information to calculate these financial metrics is missing from the question. Therefore, without the specific cash flows for the EKG/ECG machine and the anesthesia machine, it is not possible to make the recommended calculations.Generally speaking, to evaluate and recommend the project with the highest NPV, one would compare the present value of the cash inflows to the initial investment for both projects. The payback period is the time it takes for the project to recover its initial investment from net cash inflows. Return on investment is a measure of profitability calculated as the net profit divided by the cost of the investment. Lastly, IRR is the discount rate at which the present value of future cash flows equals the initial investment, meaning the project breaks even.