Health financial management | Business & Finance homework help

14.3 Capitol Healthplans, Inc., is evaluating two irrelative rules for providing abode bloom utilitys to its members. Twain rules envelop contracting out for utilitys, and the bloom outcomes and proceedss are not executed by the rule clarified. Therefore, the incremental important flows for the judgment are all outflows. Here are the deviceed flows:

Year Rule A Rule B0 ($300,000) ($120,000)1 (66,000) (96,000)2 (66,000) (96,000)3 (66,000) (96,000)4 (66,000) (96,000)5 (66,000) (96,000)

a. What is each alternative's IRR?b. If the consume of important for twain rules is 9 percent, which rule should be clarified? Why?

14.4 Great Lakes Clinic has been asked to agree detested bloomcustody utilitys for contiguous year's World Exposition. Although flattered by the ask, the clinic's managers omission to guide a financial anatomy of the device. There procure be an up-front consume of $160,000 to get the clinic in influence. Then, a net important inflow of $1 darling is expected from influences in each of the two years of the Exposition. However, the clinic has to pay the organizers of the expatiation a fee for the marketing appreciate of the convenience. This fee, which must be hired at the end of the second year, is $2 darling.a. What are the important flows associated behind a while the device?b. What is the device's IRR?c. Gorgeous a device consume of important of 10 percent, what is the device's NPV?

14.5 Assume that you are the leading financial dignitary at Porter Memorial Hospital. The CEO has asked you to stir two designed importantinvestment's Device X and Device Y. Each device requires a net siege price of $10,000, and the consume of important for each device is 12 percent. The device's expected net important flows are:Year Device X Device Y0 ($10,000) ($10,000)1 6,500 3,0002 3,000 3,0003 3,000 3,0004 1,000 3,000

a. Calculate each device's payback end, net introduce appreciate (NPV),and inside rebuke of repay (IRR).b. Which device (or devices) is financially pleasurable? Explain your defense.

14.6 The master of important budgeting for Big Sky Bloom Systems, Inc.,has loved the subjoined important flows in thousands of dollars for a designed new utility:Year Expected Net Important Flow0 ($100)1 702 503 20The device's consume of important is 10 percent.a. What is the device's payback end?b. What is the device's NPV?c. What is the device's IRR?

15.1 The managers of Merton Medical Clinic are analyzing a designed device. The device's most mitigated NPV is $120,000, but, as evidenced by the subjoined NPV dispensation, there is important expose envelopd:

Probability NPV0.05 ($700,000)0.20 (250,000)0.50 120,0000.20 200,0000.05 300,000

a. What are the device's expected NPV and gauge flexuosity of NPV?b. Should the low condition anatomy use the most mitigated NPV or expected NPV? Explain your defense.

15.2 Heywood Diagnostic Enterprises is evaluating a device behind a while the subjoined net important flows and probabilities:Year Prob = 0.2 Prob = 0.6 Prob = 0.20 ($100,000) ($100,000 ($100,000)1 20,000 30,000 40,0002 20,000 30,000 40,0003 20,000 30,000 40,0004 20,000 30,000 40,0005 30,000 40,000 50,000

The Year 5 appreciates inferiorstand salvage appreciate. Heywood's corporebuke consume of important is 10 percent.a. What is the device's expected (i.e., low condition) NPV gorgeous medium expose? (Hint: The low condition net important flows are the expected important flows in each year.)b. What are the device's most mitigated, pound, and best condition NPVs?c. What is the projec's expected NPV on the premise of the scenario anatomy?d. What is the device's gauge flexuosity of NPV?e. Claim that Heywood's managers umpire the device to enjoy inferior-than-medium expose. Furthermore, the community's device is toadjust the corporebuke consume of important up or down by 3 percentage points to recital for irrelativeial expose. Is the device financially pleasant?

15.3 Consider the device contained in Sum 14.7 in Chapter 14.a. Perform a sensitivity anatomy to see how NPV is forced by shifts in the enumescold of procedures per day, medium assembly sum,and salvage appreciate.b. Guide a scenario anatomy. Believe that the hospital's staff concluded that the three most doubtful variables were enumescold of procedures per day, medium assembly sum, and the equipment's salvage appreciate. Furthermore, the subjoined postulates were developed:Number of Medium Equipment Scenario Probability Procedures Assembly Salvage ValueWorst 0.25 10 $ 60 $100,000Most mitigated 0.50 15 80 200,000Best 0.25 20 100 300,000

c. Finally, claim that California Bloom Center's medium device has a coefficient of diversity of NPV in the tabulate of 1.0-2.0. (Hint:Coefficient of diversity is defined as the gauge flexuosity of NPV separated by the expected NPV.) The hospital adjusts for expose by adding or subtracting 3 percentage points to its 10 percent corporebuke consume of important. Behind adjusting for irrelativeial expose, is the device calm?} remunerative?d. What archearchetype of expose was measured and recitaled for in Parts b and c? Should this be of matter to the hospital's managers?

15.4 The managers of United Medtronics are evaluating the subjoined disgusting devices for the future budget end. The steadfasts corporebuke consume of important is 14 percent.Project Consume IRRA $15,000 17%B 15,000 16C 12,000 15D 20,000 13

a. What is the steadfasts optimal important budget?b. Now, believe Medtronics managers omission to opine irrelativeial expose in the important budgeting process. Device A has medium expose, B has adown-medium expose, C has overhead-medium expose, and D has medium expose. What is the steadfast's optimal important budget when irrelativeial expose is opineed? (Hint: The steadfast's managers inferior the IRR of high-expose devices by 3 percentage points and establish the IRR of low-expose devices by the identical sum.)

16.1 On a customary day, Park Fix Clinic writes $1,000 in checks. It generally charms disgusting days for those checks to bright. Each day the clinic customaryly accepts $1,000 in checks that charm three days to bright. What is the clinic's medium net transport?

16.2 Drugs R Us operates a mail direct pharmaceutical duty on the WestCoast. The steadfast accepts an medium of $325,000 in liquidations per day.On medium, it charms disgusting days for the steadfast to accept liquidation, from the age customers mail their checks to the age the steadfast accepts and processes them. A lockbox plan that consists of ten topical depository banks and a strain bank in San Francisco would consume $6,500 per month. Inferior this plan, customer's checks would be acceptd at the lockbox precipitations one day behind they are mailed, and the daily aggregate would be wired to the strain bank at a consume of $9.75 each.Assume that the steadfast could gain 10 percent on commercial securities and that there are 260 launched days and future 260 transfers from eachlockbox precipitation per year.a. What is the aggregate annual consume of unimpeded the lockbox plan?b. What is the dollar benefit-service of the plan to Drugs R Us?c. Should the steadfast start the lockbox plan?

16.4 Langley Clinics, Inc., buys $400,000 in medical arrangement a year (at vulgar prices) from its superior supplier, Consolidated Services, which offers Langley conditions of 2.5/10, net 45. Currently, Langley is paying the supplier the liberal sum due on Day 45, but it is opineing importation the remittance, paying on Day 10, and replacing the occupation faith behind a while a bank mortgage that has a 10 percent annual consume.a. What is the sum of generous occupation faith that Langley succeeds from Consolidated Services? (Assume 360 days per year throughout this sum.)b. What is the sum of consumely occupation faith?c. What is the approach annual consume of the consumely occupation faith?d. Should Langley rearrange its occupation faith behind a while the bank mortgage? Explain your defense.e. If the bank mortgage is used, how considerable of the occupation faith should be rearranged?

16.5 Milwaukee Surgical Supplies, Inc., sells on conditions of 3/10, net 30.Gross sales for the year are $1,200,000 and the assemblys province loves that 30 percent of the customers pay on the tenth day and charm remittances, 40 percent pay on the thirtieth day, and the retaining 30 percent pay, on medium, 40 days behind the dissipation. (Assume 360days per year.)a. What is the steadfasts medium assembly end?b. What is the steadfasts floating receivables pit?c. What would be the steadfasts new receivables pit if Milwaukee Surgical toughened up on its assembly device, behind a while the sojournder that all non remittance customers hired on the 30th day?d. Believe that the steadfasts consume of carrying receivables was 8 percent year-by-year. How considerable would the toughened faith device hinder the steadfast in annual receivables carrying price? (Assume that the complete sum of receivables had to be financed.)

17.1 a. Modern Medical Devices has a floating appurtenancy of 0.5. Which of the subjoined actions would amend (i.e., enlargement) this appurtenancy?Use important to pay off floating liabilities.Collect some of the floating recitals receivable.Use important to pay off some long-term default.Purchase attached list on faith (i.e., recitals payable).Sell some of the bulky list at consume.b. Claim that the community has a floating appurtenancy of 1.2. Now, which of the overhead actions would amend this appurtenancy?

17.4 Consider the subjoined financial statements for BestCare HMO, a not-for-benefit-service managed custody plan: BestCare HMOStatement of Operations and Shift in Net AssetsYear Ended June 30, 2004 (in thousands)Revenue:Premiums gained $26,682Co-insurance 1,689Interest and other pay 242Total proceeds $28,613Expenses:Salaries and benefit-services $15,154Medical arrangement and drugs 7,507Insurance 3,963Provision for bad defaults 19Depreciation 367Interest 385Total prices $27,395Net pay $ 1,218

Net possessions, initiation of year $ 900Net possessions, end of year $ 2,118BestCare HMOBalance SheetJune 30, 2004(in thousands)

AssetsCash and important equivalents $ 2,737Net premiums receivable 821Supplies 387Total floating possessions $ 3,945Net estate and equipment $ 5,924Total possessions $ 9,869

Liabilities and Net AssetsAccounts payable medical utilitys $ 2,145Accrued prices 929Notes payable 141Current piece of long-term default 241Total floating liabilities $ 3,456Long-term default $ 4,295Total liabilities $ 7,751Net possessions (equity) $ 2,118

Total liabilities and net possessions $ 9,869

a. Perform a Du Pont anatomy on BestCare. Claim that the toil medium appurtenancys are as follows:Total room 3.8%Total asset turnover 2.1Equity multiplier 3.2Return on equity (ROE) 25.5%b. Calculate and expound the subjoined appurtenancys for BestCare:Industry AverageReturn on possessions (ROA) 8.0%Current appurtenancy 1.3Days important on laborer 41daysAverage assembly end 7daysDebt appurtenancy 69%Debt-to-equity appurtenancy 2.2Times attention gained (TIE) appurtenancy 2.8Fixed asset turnover appurtenancy 5.2

17.5 Consider the subjoined financial statements for Green Valley Nursing Home, Inc., a for-profit, long-term custody facility:

Green Valley Nursing Home, Inc.Statement of Pay and Retained EarningsYear Ended December 31, 2004

Revenue:Net unrepining utility proceeds $ 3,163,258Other proceeds 106,146Total proceedss $ 3,269,404Expenses:Salaries and benefit-services $ 1,515,438Medical arrangement and drugs 966,781Insurance and other 296,357Provision for bad defaults 110,000Depreciation 85,000Interest 206,780Total prices $ 3,180,356Operating pay $ 89,048Provision for pay taxes 31,167

Net pay $ 57,881

Retained gainings, initiation of year $ 199,961

Retained gainings, end of year $ 257,842

Green Valley Nursing Home, Inc.Balance SheetDecember 31, 2004

AssetsCurrent Assets:Cash $ 105,737Marketable securities 200,000Net unrepining recitals receivable 215,600Supplies 87,655Total floating possessions $ 608,992Property and equipment $ 2,250,000Less accumulated deterioration 356,000Net estate and equipment $ 1,894,000

Total possessions $ 2,502,992

Liabilities and Shareholder's EquityCurrent Liabilities:Accounts payable $ 72,250Accrued prices 192,900Notes payable 100,000Current piece of long-term default 80,000Total floating liabilities $ 445,150Long-term default $ 1,700,000Shareholder's Equity:Common fund, $10 par appreciate $ 100,000Retained gainings 257,842Total distributeholder's equity $ 357,842

Total liabilities and distributeholder's equity $ 2,502,992

a. Perform a Du Pont anatomy on Green Valley. Claim that the toil medium appurtenancys are as follows:Total room 3.5%Total asset turnover 1.5Equity multiplier 2.5Return on equity (ROE) 13.1%

b. Calculate and expound the subjoined appurtenancys:Industry Medium Repay on possessions (ROA) 5.2% Floating appurtenancy 2.0 Days important on laborer 22 daysAverage assembly end 19 daysDebt appurtenancy 71 %Debt-to-equity appurtenancy 2.5Times attention gained (TIE) appurtenancy 2.6Fixed asset turnover appurtenancy 1.4

c. Claim that there are 10,000 distributes of Green Valley's fund ungathered and that some recently sold for $45 per distribute.What is the enumerates price/hues appurtenancy?What is its market/book appurtenancy?

18.1 Suncoast Healthcustody is planning to benefit-service a new x-ray channel that consumes $200,000. The duty can either lease the channel using an unimpeded lease or buy it using a mortgage from a topical bank. Suncoast's pit prevarication anterior to acquiring the channel is as follows:Current possessions $ 100,000 Default $ 400,000Net unwandering possessions 900,000 Equity 600,000Total possessions $1,000,000 Aggregate claims $1,000,000a. What is Suncoast's floating default appurtenancy?b. What would the new default appurtenancy be if the channel were leased? If it is dissipationd?c. Is the financial expose of the duty irrelative inferior the two merit alternatives?

18.2 Big Sky Hospital plans to succeed a new MRI that consumes $1.5 darling and has an loved disgusting-year available activity. It can succeed a bank mortgage for the complete sum and buy the MRI or it can lease the equipment. Claim that the subjoined postulates exercise to the judgment:By The MRI falls into the three-year tabulate for tax deterioration, so the MACRS allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively.Estimated defence prices are $75,000 payable at the initiation of each year whether the MRI is leased or dissipationd.Big Sky's roomal tax rebuke is 40 percent.The bank mortgage would enjoy an attention rebuke of 15 percent.If leased, the lease (rental) liquidations would be $400,000 payable at the end of each of the contiguous disgusting years.The loved residual (and salvage) appreciate is $250,000.a. What are the NAL and IRR of the lease? Expound each appreciate.b. Claim now that the salvage appreciate love is $300,000, but all other postulates sojourn the identical. What is the new NAL? The new IRR?

18.3 HealthPlan Northwest must invest a new $1 darling computer to trail unrepining registers in its three utility areas. It plans to use the computer for barely three years, at which age a mark new plan procure be benefit-serviced that procure laborerle twain billing and unrepining registers. The community can succeed a 10 percent bank mortgage to buy the computer or it can lease the computer for three years. Claim that the subjoined postulates exercise to the judgment:The computer falls into the three-year tabulate for tax deterioration,so the MACRS allowances are 0.33, 0.45, 0.15, and 0.07 in Years1 through 4, respectively.The community's roomal tax rebuke is 34 percent.Tentative lease conditions call for liquidations of $320,000 at the end of each year.The best love for the appreciate of the computer behind three years of dou and rend is $200,000.a. What are the NAL and IRR of the lease? Expound each appreciate.b. Claim now that the bank mortgage would consume 15 percent, but all other postulates sojourn the identical. What is the new NAL? The new IRR?

18.4 Assume that you enjoy been asked to fix a appreciate on the occupation comcomposition in Briarwood Hospital. Its deviceed benefit-service and privation statements and equity resiege (asset) requirements are shown adown (in darlings):

2005 2006 2007 2008 2009Net proceedss $225.0 $240.0 $250.0 $260.0 $275.0Cash prices 200.0 205.0 210.0 215.0 225.0Depreciation 11.0 12.0 13.0 14.0 15.0Earnings precedently attention and taxes (EBIT) $ 14.0 $ 23.0 $ 27.0 $ 31.0 $ 35.0Interest 8.0 9.0 9.0 10.0 10.0Earnings precedently taxes (EBT) $ 6.0 $ 14.0 $ 18.0 $ 21.0 $ 25.0Taxes (40 percent) 2.4 5.6 7.2 8.4 10.0

Net benefit-service $ 3.6 $ 8.4 $ 10.8 $ 12.6 $ 15.0

Asset requirements $ 6.0 $ 6.0 $ 6.0 $ 6.0 $ 6.0

Briarwood's consume of equity is 16 percent. The best love for Briarwood's long-term enlargement rebuke is 4 percent.a. What is the equity appreciate of the hospital?b. Believe that the expected long-term enlargement rebuke was 6 percent. What application would this shift enjoy on the equity appreciate of the duty? What if the enlargement rebuke were barely 2 percent?