Case Study: Rationing Available Capital

Consider the following scenario:     

 A Saudi Arabian hospital bought a new medical laser machine for 2,812,500 Saudi riyals (SAR). The machine will generate a cashflow of 562,500 SAR for six years, which is the expected useful life starting Year 1. The cost of capital is 8 percent. The expected salvage value for each year is shown below:     

see the attachment 

    Using NPV, determine at what year the hospital should dispose of the equipment. Please make certain that you show your calculations. Submit your findings in a proposal to the hospital.      Your proposal should include the following components:      â— A one-page discussion identifying when the equipment should be disposed of based on NPV. ● The calculations of NPV in an Excel spreadsheet which supports your position. You must show all your calculations for credit. 

 

 

materilas 

Gapenski, L. C., & Pink, G. H. (2015). Understanding healthcare financial management (7th ed.). Chicago: Association of University Programs in Health Administration and Health Administration Press. ISBN: 9781567937060

● Chapter 10: Capital Structure in Understanding Healthcare Financial Management  â— Chapter 11: Capital Budgeting in Understanding Healthcare Financial Management 

● Mukherjee, T., Al Rahahleh, N., Lane, W., & Dunn, J. (2016). The capital budgeting process of healthcare organizations: A review of surveys. Journal of Healthcare Management, 61(1), 58-77.  

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