Read Case 16 (pages 97-101) from Gapenski’s Cases in HealthcareFinance – “Seattle Cancer Center.”Create a presentation in Microsoft PowerPoint (PPT), suitable forpresentation to a senior level executive. The final product shouldinclude a title slide with your name and the name of the case. Two orthree slides per question (see below) should be sufficient to respondappropriately to the case prompts. Slide numbers should be included.Use of non-case related graphics is not required. All Excel workshould be imported into the presentation in table format (in the bodyof the document) or enclosed as an Appendix within the same document.Use of external resources and articles is encouraged, but notrequired.In your presentation, provide a response to the following questionsfrom the case study:Should the Center lease the equipment?What is the maximum lease payment that the Center would be willing to pay?What would be the NAL to the Center if tax-exempt (municipal) debtfinancing was available to the Center?Would the availability of tax-exempt debt financing make leasing moreor less attractive to the Center than before? Why?As a baseline, assume all cash flows have the same risk; that is,ignore residual value risk and use the same discount rate for alllessee cash flows. Student Name:
Exercise Assignment Instructions:
• Provide answers to each problem for each weekly exercise assignment.
• Include any calculations, equations, and/or formulas for each question in the problem.
• Show your work for each answer.
• Submit Your Weekly Exercise Answers for the Excel Workbook to the Classroom by the
PROBLEM 1: Week 7 and Week 8 Lease Financing
A HCA hospital in Colorado plans to obtain a new MRI that costs $1.5 million and has
an estimated four-year 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.
– HCA’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.
What are the NAL and IRR of the lease? Should the organization buy or lease the equipment?
in the problem.
the Classroom by the Assigned Due Date for the Assigned Week(s).
to the decision:
are 0.33, 0.45,
hether the MRI is
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