Conduct a search for theoretical and empirical literature pertinent to capital budgeting theory and practice. Locate at least three peer-reviewed journal articles in addition to the two articles provided in the learning activities. Address the following elements:
Evaluate each of the five articles. Discuss research objectives, methods, main findings, conclusions, key limitations, and contributions.
Synthesize the key findings from all the articles reviewed in Part (1) into basic themes.
Assess the gaps in the literature as related to capital budgeting theory and practice.
Identify directions for future research.
Evaluate the following two proposed capital investment projects. Complete the evaluation using analytic tools including Payback Period (PP), Net Present Value (NPV), Internal Rate of Return (IRR), and Profitability Index (PI) in Excel. Report the evaluation results in your paper. Make a decision to invest in one of the two proposed capital projects.
You are the Administrative Director of the Operating Room (OR) at a large hospital within a national health system. The OR recently hired a new General Surgeon. Upon review of the existing imaging devices, he requested for an acquisition of the following two pieces of medical equipment:
CT: A new mobile 16-slice CT Scanner
PET: A refurbished PET Scanner
The following are the financial data that you have compiled concerning these two scanners:
Available capital for the projects is $750,000.
The interest rate used to discount cash flows is 6%.
The CT Scanner’s total cost in acquisition, shipping, and installation is $365,500. It has a 10-year useful life with no salvage value at the end of Year 10. It can generate the following net cash flows from Year 1 to Year 10:
Yr Net Cash Flow
The refurbished PET Scanner’s total cost in acquisition, shipping, and installation is $699,500. It has a 7-year useful life with no salvage value at the end of Year 7. It can generate the following net cash flows from Year 1 to Year 7:
Yr Net Cash Flow
- Assess the limitations of capital budgeting analytic tools such as Payback Period (PP), Net Present Value (NPV), Internal Rate of Return (IRR), and Profitability Index (PI).
- Conclude with a summary discussion.