A hospital is considering acquiring an MRI machine as there is a good demand for MRI procedures. They estimate that the...
- A hospital is considering acquiring an MRI machine as there is a good demand for MRI procedures. They estimate that there would be about 400 MRI Procedures per year. A new machine would cost $2,500,000 and it could be used for five years after which, it could be sold for $400,000. The variable cost per procedure is $300, and average revenue is $1500 per procedure.
Instead of buying the machine, the hospital can rent a machine from the equipment manufacturer who would charge them $800 for each procedure done using the machine. The variable costs and revenue per procedure will be the same as above.
Assume a planning horizon of five years.
Which decision would you recommend if the time value of money is 8%?
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