Sage Imaging Center Case:
Facts:
Number of Radiologists: 15
Machines current performance: 200 Images/Day
Number of Machines: 3
Work days per year: 5 days a week = 260 days
Average annual number of images: 52000 images
Breakdown of images per clients sectors:

Annual Sales: 1000*52000= $ M 52
Projected growth in imaging= 20% increase = 62400 images per year
Projected Sales= $ 62,400,000

Choices:
1. Buy a refurbished MRI machine with a bank loan with a useful life of 7 years (Franklin County Bank)
2. Lease a new MRI machine for 5 years (Wade Int’l)
Analysis:
Factors to measure:
1. Total Payments incurred by the company (The least expensive option is favorable)
2. Net Present Value of Purchase Vs. Net Present Value of Lease (The lower NPV is favorable)
3. Financial situation of Sage Imaging Center
4. Technical Advancements and maturity in medical imaging industry
5. Duration to ownership
6. Facts about refurbished MRI machines

Factors:
1. Total Payments incurred by Sage Imaging:
Leasing:
$120,000 5 payments + $200,000 purchase at the end of year 5+ $36,000 maintenance payments for 2 years after purchase

Payments
Maintenance
Purchase
Y1
120000

Y2
120000

Y3
120000

Y4
120000

Y5
120000

200000
Y6

36000

Y7

36000

Sum
800000
72000
200000
Total
$1,072,000

Purchase:
$50,000 down payment+ annual payment of $83,499 (Calculated via financial calculator when PV= 450,000, N=7 years, I/Y= 7%)+$10,000 annual maintenance payments

PMT
Maintenance
Initial Down PMT
Payments

Y1
83499
10000
50000
143499
Y2
83499
10000

93499
Y3
83499
10000

93499
Y4
83499
10000

93499
Y5
83499
10000

93499
Y6
83499
10000

93499
Y7
83499
10000

93499
Total Payments

$704,493
(Least Expensive Option)

2. NPV:
Leasing: (Please see the Excel file attached)
P.S: NPV was calculated using a financial calculator

Purchase

3. Financial Situation of Sage Imagine:
Sage Imaging’s cash situation is tight we analyze the situation as follows:
Option
Down Payment Cost
Annual Payment
Maintenance Cost
Purchase Cost
Lease
No Cost +++
120K
72K
200K---
Purchase
50K ---
83.5K
70K
No cost+++

This simple and quick financial plan shows that purchasing a refurbished machine although has a negative effect on the short run financial plan of Sage Imaging since it requires a down payment which is a drawback while leasing a new machine on the long run will cost the company a big amount of dollars, so if Sage is looking for a short term financial bonus leasing could be a good solution, but we need to evaluate the rest of the factors.

4. Technical advancements in MRI technology:
According to some research such as the study done by Christian Degen, University of Leipzig 2014, and Sobol, W.T. “Recent advances in MRI technology: Implications for image quality and patient safety”2012, showed that the MRI technology has matured in the last 10 years, and the pace of technological advancements introduced to market place has slowed down, and that mostly due to the physical constraints that preclude further resolution.
These facts actually