General Hospital is planning to add a new diagnostic machine which should improve its quality of certain blood tests.The machine under consideration has a cost of $79,189 and is expected to save the hospital $8,000 each year.The machine has an expected useful life of 14 years.
Required:
a.Calculate the internal rate of return on the diagnostic machine.
b.If the hospital uses a hurdle rate of 6%, should the diagnostic machine be purchased? Why or why not?

Question

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The Answer of General Hospital is planning to add a new diagnostic machine which should improve its quality of certain blood tests.The machine under consideration has a cost of $79,189 and is expected to save the hospital $8,000 each year.The machine has an expected useful life of 14 years.
Required:
a.Calculate the internal rate of return on the diagnostic machine.
b.If the hospital uses a hurdle rate of 6%, should the diagnostic machine be purchased? Why or why not?

General Hospital Is Planning to Add a New Diagnostic Machine