Problem 16-41 Student Name:
Class:
Enter appropriate data in the yellow cells. An asterisk (*) to the right indicates an incorrect amount. Answers should be entered as whole numbers not formulas.
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Contract with Diagnostic
Testing Services
Flat Fee * * * * * * * * * *
Per-specimen charges * * * * * * * * * *
Loss Contribution Margin on Referred Cases * * * * * * * * * *
Total Cash Flow * * * * * * * * * *
Discount Factor * * * * * * * * * *
Present Value * * * * * * * * * *
Net Present Value *
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Establish In-House
Testing Lab
Rental of storage space * * * * * * * * * *
Equipment * *
Staff * * * * * * * * * *
Fixed operating costs * * * * * * * * * *
Variable operating costs * * * * * * * * * *
Fees for lab services * * * * * * * * * *
Total Cash Flow * * * * * * * * * * *
Discount Factor * * * * * * * * * * *
Present Value * * * * * * * * * * *
Net Present Value *
Difference in NPV:
Contract with Diagnostic Testing Services (3,277,580)
Establish In-House Testing Lab (3,245,730)
Difference (31,850)
Which alternative should be chosen? In-House Lab
Problem 16-41 Student Name:
Class:
Enter appropriate data in the yellow cells. An asterisk (*) to the right indicates an incorrect amount. Answers should be entered as whole numbers not formulas.
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Contract with Diagnostic
Testing Services
Flat Fee (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$
Per-specimen charges (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000)
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Establish In-House
Testing Lab
Rental of storage space (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$
Equipment (625,000)$ (300,000)
Staff (200,000) (200,000) (200,000) (200,000) (200,000) (200,000) (200,000) (200,000) (200,000) (200,000)
Fixed operating costs (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000)
Variable operating costs (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000)
Present Value (625,000)$ (383,990)$ (342,710)$ (306,160)$ (464,280)$ (243,810)$ (218,010) (194,360)$ (173,720)$ (155,230)$ (138,460)$
Contract with Diagnostic Testing Services (3,277,580)
Establish In-House Testing Lab (3,245,730)
Which alternative should be chosen? In-House Lab
Loss Contribution Margin on Referred Cases (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)
Present Value (517,940)$ (462,260)$ (412,960)$ (368,880)$ (328,860)$ (294,060)$ (262,160)$ (234,320)$ (209,380)$ (186,760)$
Problem 16-41 Student Name:
Class:
Enter appropriate data in the yellow cells. An asterisk (*) to the right indicates an incorrect amount. Answers should be entered as whole numbers not formulas.
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Contract with Diagnostic
Testing Services
Flat Fee (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$
Time 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Establish In-House
Testing Lab
Rental of storage space (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$ (30,000)$
Equipment (625,000)$ (300,000)
Fixed operating costs (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000) (50,000)
Fees for lab services 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Difference in NPV:
Contract with Diagnostic Testing Services (3,277,580)$
Difference (31,850)$
Which alternative should be chosen? In-House Lab
Per-specimen charges (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000)
Loss Contribution Margin on Referred Cases (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)