Expert answer:Discussion/Module the healthcare industry has expe

Solved by verified expert:In recent years, the healthcare industry has experienced significant turmoil in the certainty of revenue and access to capital markets. However, the need to update equipment, expand and contract service offerings, and to more effectively meet the needs of the local patient population has only intensified. These phenomena have underscored the need for flexibility in the procurement process—to include property, equipment, and personnel. For this discussion, do the following:Locate at least one online resource (a link, article, or book, for example) pertaining to lease versus buy analyses in general or within the healthcare industry. In your discussion, examine the content and then share the resource (post your resource and use APA style). Summarize the resource(s) and what you find useful about it. Once your material is posted, be sure to review and comment on the materials posted by at least two of your peers. NOTE: Resources cannot be duplicated, so be sure to get into the conversation early. **discussion need to be in word format and module needs to be in xcel format
mod5.docx

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HCM565
Module 5 CT
Chapter 8 Problem 2
Big Sky Hospital plans to obtain a new MRI that costs $1.5 million and has an estimated fouryear useful life. It can obtain a bank loan for the entire amount and buy the MRI, or it can
obtain a guideline lease for the equipment. Assume that the following facts apply to the
decision:
– The MRI falls into the three-year class for tax depreciation, so the MACRS allowances are 0.33,
0.45, 0.15, and 0.07 in Years 1 through 4, respectively.
– Estimated maintenance expenses are $75,000 payable at the beginning of each year whether
the MRI is leased or purchased.
– Big Sky’s marginal tax rate is 40 percent.
– The bank loan would have an interest rate of 15 percent.
– If leased, the lease payments would be $400,000 payable at the end of each of the next four
years.
– The estimated residual (and salvage) value is $250,000.
a. What are the NAL and IRR of the lease? Interpret each value.
b. Assume now that the salvage value estimate is $300,000, but all other facts remain the same.
What is the new NAL? The new IRR?
(Hint: Use the following format as a guide.)
Year 0
Cost of owning:
Net purchase price
Maintenance cost
Maintenance tax savings
Depreciation tax savings
Residual value
Tax on residual value
Net cash flow
Cost of leasing:
Lease payment
Lease tax savings
Maintenance cost
Maintenance tax savings
Net cash flow
Net advantage to leasing:
Year 1
Year 2
Year 3
Year 4
PV cost of leasing
PV cost of owning
NAL
Chapter 8 Problem 8
Walton Nursing Home (WNH) is evaluating a guideline lease agreement on laundry equipment
that costs $250,000 and falls into the MACRS three-year class. The home can borrow at an 8
percent rate on a four-year loan if WHN decided to borrow and buy rather than lease. The
laundry equipment has a four-year economic life, and its estimated residual value is $50,000 at
the end of Year 4. If WHN buys the equipment, it would purchase a maintenance contract
which costs $5,000 per year, payable at the beginning of each year. The lease terms, which
include maintenance, call for a $71,000 lease payment at the beginning of each year. WNH’s tax
rate is 40 percent. Should the home lease or buy?
…
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