This assignment requires you to calculate net present value (NPV), which is the present value (PV) of benefits minus the PV of costs.
A new project being considered by a hospital has an initial start-up cost of $50 million and is expected to accrue benefits (additional revenue) of $17 million in each of the following years: Years 3, 4, 5 and 6. At a 9% discount rate, should the hospital invest in the project? (“Year 1” means one year from today, “Year 2” means two years from today, and so on. “Start-up” here means “Year 0” – that is, today.)
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