Question

Mercy Hospital is considering a project that is expected to reduce the hospital's annual operating costs by $250,000 per year beginning in Year 1. In addition, the project is expected to generate $400,000 in revenue per year beginning in Year 1. All else held constant, what is the project's expected net cash flow in Year 1?

Answer 1

$650,000

Step-by-step explanation:

The computation of the expected net cash flow for the year 1 is shown below:

= Annual operating cost reduced + expected revenue generated per year in the year 1

= $250,000 + $400,000

= $650,000

By adding the annual operating cost, and the expected revenue generated we get the project expected net cash flow for the year 1