. Portland Surgery Center (a not-for-profit organization) located in Portland, O

Question

. Portland Surgery Center (a not-for-profit organization) located in Portland, Oregon, plans to purchase an imaging machine for$575,000, with estimated life of 5 years. The salvage value is expected to be $125,000. The expected number of visits for the first year is 1,325 and this number with increase by 5% each year for the other 4 years. All visits will fall under APC 0307 as shown in the table below:
CPT Short Descriptor APC Weight
78459 Heart muscle imaging (PET) 0307 16.0776

The operating costs are expected to be $145, 0000 in the first year and then will increase by 4% each year for the other 4 years. Due to Federal budget cuts, the conversion factor is expected remain $68.88. The cost of capital is 10%.

1. Estimate the net cash flows of this project over its five years estimated life

2. What are the project’s NPV and IRR?

3. What is the payback period?
4. What is the worst and best case scenarios of NPV at 7% risk?

Explanation / Answer

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