CALIFORNIA IMAGING CENTER

NEW DIAGNOSTIC EQUIPMENT CASH FLOW ANALYSIS (cost of capital = 10%)

A. Future Incremental Cash Revenues and Costs

0 1 2 3 4
Diagnostic equipment cost $ (600,000)
Net revenues $ 300,000 $ 315,000 $ 330,750 $ 347,288
Labor/maintenance costs (100,000) $ (105,000) $ (110,250) $ (115,763)
Utilities costs (10,000) $ (10,500) $ (11,025) $ (11,576)
Supplies (18,750) $ (19,688) $ (20,672) $ (21,705)
Incremental overhead $ 5,000 $ 5,250 $ 5,513 $ 5,788
Operating income
Salvage value
Net cash flow $ (600,000) $ 176,250 $ 185,063 $ 194,316 $ 204,031

B.
Net present value (NPV) @ 10% = $255,726
Internal rate of return (IRR) = 23.4%

C.
Cost of capital if project is high risk = 13%
NPV using your new cost of capital = $185,540
 Given:
Diagnostic equipment cost = $600,000 with salvage value of $200,000 at the end of Year 5
Equipment expected to be used 15 times a day for 250 days a year
ues and Costs Each procedure is expected to generate $80 cash revenue during Year 1
5 Labor/maintenance costs = $100,000 during Year 1
Utilities costs = $10,000 in Year 1
$ 364,652 Supplies = $5 per procedure during Year 1
$ (121,551) Incremental cash overhead = $5,000 in Year 1
$ (12,155) All costs and revenues are expected to increase at a 5% inflation rate after Year 1
$ (22,791)
$ 6,078

200,000
$ 414,233