Question

A hospital purchased new MRI equipment and intended to be used for 4 years. The information is given below. As part of the warranty agreement, the maintenance costs will be waived for the first 4 years. At MARR of 29% per year, determine the minimum revenue per year to realize the expected recovery and return.

Answer 1

the information is missing but I looked for a similar question that can help as an example (hopefully it will be the same):

purchase cost $750,000

useful life 4 years, salvage value $150,000

discount rate 29%

in order to answer this question, we would need to calculate a cash flow that results in NPV = 0

0 = -$750,000 + CF/1.29 + CF/1.29² + CF/1.29³ + (CF + $150,000)/1.29⁴

$750,000 = CF/1.29 + CF/1.29² + CF/1.29³ + (CF + $150,000)/1.29⁴

$750,000 = 0.7752CF + 0.6009CF + 0.4658CF + 0.3611CF + $54,166.70

$695,833.30 = 2.203CF

CF = $695,833.30 / 2.203 = $315,857.15