Pearland Medical Center’s board recently decided to investigate ways to increase revenues

Pearland Medical Center’s board recently decided to investigate ways to increase revenues. The organization has the benefit of different revenue streams, including patient revenue and returns on investments. Additionally, the Center has just borrowed $1,000,000 on a five-year loan with annual payment term at a 12 percent rate. The first payment will be due one year from now. This assignment has two parts:

Part 1: Amortization Schedule

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1. Construct the amortization schedule for this loan.
2. How do the interest payment, principal payment, and total payment change when a loan is amortized?

Part 2: Investments

1. Suppose the board were going to invest in an ordinary annuity requiring a payment of $10,000 over the next five years with an interest rate of 5%. What is the future value of this ordinary annuity investment?
2. The board is considering other options for investing as well. For example, they want to double their investment of $70,000 over the next 12 years by using conventional securities with a projected return of 6%. Does the present value of the investment indicate that this is possible?
3. What criteria should you examine in considering annuities? Include the common characteristics of variable annuity and equity-indexed annuity in your response.

Length: 4 pages and a reference page.

Pearland Medical Center is considering two proposed capital investment opportunities, Project A and Project B. Each project requires a net investment of $100,000. The cost of capital for each project is 12 percent. The projects’ expected cash revenues are:

(SEE ATTACHEMENT FOR SCALE)

Year
Calculate each project’s payback period, net present value, and internal rate of return. Explain which project is financially acceptable.
Avery, Flaherty, and Rhee (2011) noted that when choosing a capital budgeting decision tool, academics recommend NPV as the primary approach followed by IRR. What are the advantages and disadvantages of NPV and IRR methods in regards to profitability analysis in evaluating investment decisions?
Why are firms using the payback period method as a primarily decision-making tool?
Length: 3–4 pages, excluding title page and references.