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JirannaHealthcareCaseStudy

Cash inflows
Theflowing are the cash inflows and outflows from the proposed project(see the Excel spreadsheet attached to the workings)
year 
Cash outflow ($) 
Cash inflow ($) 
0 
820,800 
400,000 
1 
708,000 
800,000 
2 
740,135 
848,000 
3 
737,837 
900,577 
4 
809,018 
955,512 
5 
845,971 
1,013,798 

Project evaluation techniques
evaluation 
Value 
NPV 
$38,469 
IRR 
11.29% 
MIRR 

PBP 
3.54 Years 
DPBP 
4.39 years 

Decision criteria
NPVThismeasures the profitability of the project (Bamberger,2008).In our case, if the hospital decides to designa centralized nurse triage line, then the NPV will be
$38469.Since the NPV is positive, it implies that this project isacceptable. Therefore, if the organization is basing their decisionon NPV, they should accept this project.
IRRThisis the rate of return which relate to independent single projects(Eugene& Michael, 2011).This rate is calculated using trial and error method. For thisproject, the internal rate of return IRR is equal to 11.29%. SinceIRR is greater than the hospital’s cost of capital, it means thatthe project is acceptable. Therefore, if the organization isevaluating its project based on the IRR bases, is should implementthe project.
MIRRThistechnique assumes that positive cash inflows are reinvested at thecompany’s cost of capital i.e. at 11%. The MIRR for this project is13.54% which is higher than the cost of capital and hence thisproject is acceptable.
PBPPaybackperiod is the length of time a project will take to recoverinvestment committed to the project (Bamberger,2008).By offering this new service, Jiranna Healthcare would recover theinvestment in 3.54 years. Since this period is longer that thedesired time, it means that this project is not acceptable for theorganization.
DPBPDiscountedpayback period refers to the length of time a project would take torecover investment in it by using discounted cash flows (Bamberger,2008).The DPBP for this project is 4.39 years. Therefore, this project hasnot met the criteria of the company which requires a maximum of 3.5years for projects to pay back their initial investment. Thus, theproject is not acceptable if the hospital is evaluating its projectson payback period bases.
Conclusion
Eventhough some project evaluation techniques such as PBP and DPBP hasshown that the project is unacceptable, I would advise JirannaHealthcare to consider other factors while making their decisions.For example, by implementing the project they would acquire asignificant market share. The project is also a complement to theservice that they are currently offering and, therefore, they need toimplement this new project for them to retain their customers andacquire more as well. The profit has also proven to be profitableand, therefore, the organization would make no loss by implementingit, but they will enjoy more benefit from the project.
References
BambergerM.(2008).Corporate financial management 4^{th}edition.Britain: Pearson Education.
EugeneB. & Michael E.(2011).FinancialManagement: Theory & Practice Branzil:Amazon.