Accounting problem need help

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The MRI Trailer costs $600,000 and has an expected life of 5 years with an estimated salvage value of $200,000 at that time.  After some extensive research, the numbers we have come up with look like this:

  • 15 tests per day for 250 days per year for each year of the projects life
  • Each procedure is expected to generate $80 in cash collections during the first year of use (Net revenue for year 1 is 15*250*80=$300,000)
  • Labor and Maintenance costs are expected to be $100,000 during the first year
  • Utilities will cost $10,000 in year one and there is an incremental overhead increase of $5,000 beginning in year one
  • Cost for expendable supplies is expected to be $5 per procedure
  • Costs and revenues are expected to increase at a 5% inflation rate
  • Our corporate cost of capital is 10%

In the Excel spreadsheet template:

  • estimate the project’s net cash flow over the 5 year estimated life.  I want you to use the properties (formulas) in Excel here.
  • determine the project’s NPV and IRR (Use the excel formulas to determine this as well)
  • Is this a project we should move forward with? (Consider NPV and strategic value here)—This can be written in text into your excel sheet.

 
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