What is the firms current receivables balance

Assignment Help Financial Management

Reference no: EM13731467

Fargo Memorial Hospital has annual net patient service revenues of $14,400,000. It has two major third-party payers, plus some of its patient is self-payers. The hospitals patient accounts manager estimates that 10% of the hospitals paying patients (its self payers) pay on Day 30, 60, percent pay on Day 60 (Payer A), and 30% pay on Day 90 (payer B). (Five percent of total billings end up as bad debt losses, but that is not relevant for this problem).

A. What is Fargo s average collection period? (Assume 360 days per year throughout this problem).

B. What is the firm’s current receivables balance?

C. What would be the firms new receivables balance if a newly proposed electronic claims system resulted in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days?

D. Suppose the firm’s annual cost of carrying receivables was 10%. If the element claims system costs $30,000 a year to lease and operate, should it be adopted (Assume that the entire receivables balance has to be financed.)

Reference no: EM13731467

Questions Cloud

Use the cash for the expansion : Rexton Oil is an all-equity firm with 100M shares outstanding. Rexton has $150M in cash and expects future free cash flows of $65M per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future cash fre..

What is the firms cost of equity : The Cracker Barrel has a beta of 0.98, a dividend growth rate of 3.2 percent, a stock price of $33 a share, and an expected annual dividend of $1.06 per share next year. The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent...

After tax cost of debt : Lawler's is considering a new project. The company has a debt-equity ratio of 0.72. The company's cost of equity is 15.1 percent, and the after tax cost of debt is 7.2 percent. The firm feels that the project is riskier than the company as a whole an..

Assume these are zero-coupon bonds : Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 40 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)

What is the firms current receivables balance : Fargo Memorial Hospital has annual net patient service revenues of $14,400,000. It has two major third-party payers, plus some of its patient is self-payers. The hospitals patient accounts manager estimates that 10% of the hospitals paying patients (..

What was the average annual growth rate of dividends : A firms dividends have grown over the last several years. 10 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $4. What was the average annual growth rate of dividends for this firm?

The hamptons home of a famed socialite hits the market : “Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan – a Gilded Age heiress and socialite, renowned for her beauty and wealth. Now Ms. Balsan’s Hamptons home is currently worth $28 million. Calculate the annual compound growth rate of..

What is the current market price of the bond : A 5.5 percent $1,000 bond matures in 7 years, pays interest semi-annually, and has a yield to maturity of 6.23 percent. What is the current market price of the bond?

What is the market rate of return on this stock : The common stock of Eddie's Engines, Inc. sells for $28.41 a share. The stock is expected to pay $3.30 per share next year. Eddie's has established a pattern of increasing their dividends by 5.4 percent annually and expects to continue doing so. What..

User Account

All Pages