Changes in the number of procedures per day

Assignment Help Corporate Finance
Reference no: EM13196353

a. Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per day, average collection amount, and salvage value. Remember supplies vary with number of procedures.
b. Conduct a scenario analysis. Suppose that the hospital's staff concluded that the three most uncertain variables were number of procedures per day, average collection amount, and the equipment's salvage value. Furthermore, the following data were developed:

Scenario Probability Number of
Procedures
Average
Collection
Equipment
Salvage
Value
Worst 0.25 10 $60 $100,000
Most likely 0.50 15 $80 $200,000
Best 0.25 20 $100 $300,000

c. Finally, assume that California Health Center's average project has a coefficient of variation of NPV in the range of 1.0 - 2.0. (Hint: Coefficient of variation is defined as the standard deviation of NPV divided by the expected NPV.) The hospital adjusts for risk by adding or subtracting 3 percentage points to its 10 percent corporate cost of capital. After adjusting for differential risk, is the project still profitable?

d. What type of risk was measured and accounted for in Parts b and c? Should this be of concern to the hospital's managers?

Reference no: EM13196353

Questions Cloud

Use of technology in psychology : The use of technology in psychology, ranging from technology in the laboratory to the use of computers in modeling
Give two examples of media that influenced our desires : Discuss one or two examples of media that have influenced your desires or affected your consumer choices and consumer behavior influenced by advertising.
Structural disposition withing the individual behavior : Behavior spring fully from structural disposition withing the individual and individual behavior is mostly a reflection of the situation he is in.
Pen and ink was the favorite sketching medium : Pen and ink was the favorite sketching medium of ______________, one of the greatest draftsmen of the 17th century
Changes in the number of procedures per day : What type of risk was measured and accounted for in Parts b and c? Should this be of concern to the hospital's managers - Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per day,
Age of expansion and manifest destiny : Between 1820-1860(the Age of Expansion and Manifest Destiny) discuss some of the major Senators of the period and the principles, ideals,laws and treaties they fought for
Does the monopoly effect regulate the prices : Singer Taylor Swift has a monopoly over a scarce resource: herself. She is the only person who can produce a Taylor Swift concert.
Strategic planning document : Term Paper Topic: Your term paper is a "Strategic Planning Document" for a HIM system model that you will research and design for a specific medical facility or hospital department of your choice, such as a clinic, free-standing radiology center, lab..
Choose the ir frequency and number of nmr signals : Select the IR frequency and number of NMR signals that is diagnostic for either isomer a or isomer b. Isomer A: cyclopentanecarboxamide Isomer B: 6-hydroxyhexanenitrile

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  Making recommendations for buy and sell

Make recommendations: on the following two companies: From an investor's perspective of whether one should buy/sell/remain neutral on both stocks.

  Explain key variables to influence amount of income

A person plans to retire today & expects to begin living off their retirement savings beginning one year from now & continuing until death.

  Create an appropriate portfolio

You are the financial adviser to 3 individuals, a young person with high risk tolerance, a middle-aged person with medium risk tolerance and an old person with low risk tolerance.

  Cost of equity for raytheon company

Examine and explain the relationship between the systematic risk coefficient on the company's operations ('asset beta'), the systematic risk to its shareholders ('equity beta') and the relationship of both concepts to the debt/equity ratio of the ..

  Calculate average working capital requirement

GX Ltd is about to commence a new business for which you are asked to calculate its average Working Capital Requirement for the first year with the help of the following information:

  Make journal entry to record reacquisition of the stock

On June 15, Bunting Company reacquired 12,000 shares of its dollar 10 par value common stock for $18 per share. Bunting uses cost method to account for treasury stock.

  Determine the bank fees

You take a loan on $500,000 for thirty years at the yearly nominal interest rate of 6 percent compounded monthly. The loan payments also have to be paid monthly.

  Issuing swaps to investors in cdo tranches

AIG played central role in financial crisis by issuing swaps to investors in CDO tranches, promising to reimburse them for any losses on tranches in exchange for a stream of premium.

  Prepare general journal entries to record the events

Equity transactions and adjustments, statement of changes in equity and prepare general journal entries to record the above events.

  Calculation of the required ratios

Use formulas to compute ratios and format cells to insert comma if there is more than three (3) numbers. Give your answer to the nearest whole dollar.

  Sole proprietorship, partnership, and corporation forms

Discuss the primary differences between partnership, sole proprietorship, and corporation forms of business ownership?

  Explain what inflation rate is expected

What inflation rate is expected during Year 2 - Consider that the real risk-free rate is 4 % and the maturity risk premium is zero.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd