DATA INPUT
Construction Costs 780,000$
First Installment (20×0) 390,000$
Second Installment (20×1) 390,000$
Equipment (paid in 20×1) 150,000$
Staffing costs (per year)(start 20x2) 800,000$
Other operating costs (per year) 200,000$
Increased Charitable Contributions 250,000$
Annual Cost Savings 1,000,000$
Major Reburbishment (20x5) 180,000$
Selling clinic in (20x9) 290,000$
Hurdle Rate 12%
SOLUTION
0 1 2 3 4 5 6 7 8 9
Type of Cash Flow 20×0 20×1 20×2 20×3 20×4 20×5 20×6 20×7 20×8 20×9
(7)Cost of Refurbishment (180,000)$
(9)Salvage Value 290,000$
Incremental Cash Flow (390,000)$ (540,000)$ 250,000$ 250,000$ 250,000$ 70,000$ 250,000$ 250,000$ 250,000$ 540,000$
Discount Factor 1.000 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361
Present Value (390,000)$ (482,143)$ 199,298$ 177,945$ 158,880$ 39,720$ 126,658$ 113,087$ 100,971$ 194,729$
Net Present Value 239,145$
(2)Equipment Purchase (150,000)$
(4)Other Operating Costs (200,000)$ (200,000)$ (200,000)$ (200,000)$ (200,000)$ (200,000)$ (200,000)$ (200,000)$
(5)Increased Charitable Contributions 250,000$ 250,000$ 250,000$ 250,000$ 250,000$ 250,000$ 250,000$ 250,000$