Consider a hospital debating whether it should adopt advance…

Consider a hospital debating whether it should adopt advanced Electronic Medical Records (EMR) technology, or stay with its current setup. Adoption of advanced EMR will incur a short term cost, but is expected to improve future payoffs for the hospital. How can adoption of EMR technology improve hospital payoffs? “Hospitals … can better consolidate information through the digitalization of data, which helps health-care providers to store, retrieve, and examine these data more efficiently… help hospitals to improve health-care quality further by providing physicians with effective decision support and easy care coordination.” (Wang 2022 IER, “Competition and multilevel technology adoption”). Suppose the hospital is forecasting 4 years ahead. Its stream of profits from each decision is given below, where t = 0 denotes current year. t = 0 t = 1 t = 2 t = 3 t = 4 Current tech 5000 4000 3000 2000 500 Upgrade to advanced tech -3000 6000 5000 5000 4000   Let PDV denote “present discounted value”. The interest rate is 5%, so r = 0.05. What is the PDV from staying at current tech? [a1] What is the PDV from upgrading to advanced tech? [a2] Should the firm upgrade? (Type in “Yes” or “No”) [a3]